The effects of mutual fund decarbonization on stock prices and carbon emissions

Präsentation vom 17. Januar 2024
Members Only
Dr. Jonas Zink, CFA

To achieve climate goals, financial flows must be redirected from climate-damaging to climate-friendly economic activities. One key approach is divestment, i.e., the systematic sale of stocks of climate-damaging companies to decarbonize investment portfolios by private, institutional, and public investors. Theoretical research suggests a link between divestment, lower stock prices, and lower CO2 emissions. 

The CFA Germany Investment Research Runner-Up Award winning paper is the first to empirically analyze the effects of divestments by European and US equity funds on the share prices and CO2 emissions of companies. The result is that large-scale divestments by funds have reduced the share prices of climate-damaging companies by an average of about 7%. These declining prices led the affected companies to reduce their CO2 emissions by an average of around 10% compared to control group. Therefore, private, institutional, and public investors may use divestment to effectively mitigate climate change.

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