This seminar uncovers a "carbon home bias" in global investor portfolios, revealing a preference for high-emission domestic firms over cleaner foreign ones.
Abstract
We undertake a global analysis of institutional investor portfolios and find widespread underweighting of companies with higher carbon emissions, both in levels and intensities. This underweighting is largely driven by foreign companies with high carbon emissions, both at the intensive (tilting) and extensive (exclusion) margins. Domestic firms with high emissions are overweighted but by a smaller magnitude. These results reveal a bias for domestic companies with high carbon emissions. The carbon home bias is stronger in settings where institutions have tighter business connections, in countries with weaker social norms regarding climate crisis, and where the political environment is more polarized.
