lunduniversity.lu.se

Department of Economics

Lund University School of Economics and Management

Finance Brown Bag: Thomas Fischer

Seminar

Thomas Fischer will present joint work with Frederik Lundtofte and Juan Carlos Parra-Alvarez (Aalborg University) under the title “Green portfolios in theory and practice”

The seminar will take place at the Alfa seminar room at 12:00.

Abstract: We develop a rational, long-horizon model in which investments may damage future production/consumption possibilities through their impact on the climate. Within this framework, we show that the optimal investment consists of four funds: i) the risk-free asset; ii) a myopic portfolio; iii) a portfolio that accounts for pollution externalities; iv) a hedging portfolio, which hedges the climate impact of investments. Further, we derive the stocks' equilibrium returns. Here, we find that, given a few simplifying assumptions, stocks that have an adverse (beneficial) impact on the climate will appear to have a positive (negative) alpha relative to the CAPM. The direct effect of the presence of climate risk is a lower willingness to hold risky financial assets that have an adverse effect on the climate. However, there is also an indirect effect: due to a hedging motive, the investor might find it attractive to hold more shares in stocks that pay out well in adverse climate scenarios.

 

 
26 November 2021
12:00–13:00

Venue

Ideon Alfa1:4013
Scheelevägen 15B
223 63 Lund

Contact

Thomas Fisher