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@unpublished{Benedetti:2020:10.2139/ssrn.3281390,
author = {Benedetti, D and Biffis, E and Chatzimichalakis, F and Lilloy, Fedele LR and Simm, I},
doi = {10.2139/ssrn.3281390},
title = {Climate change investment risk: optimal portfolio construction ahead of the transition to a lower-carbon economy},
url = {http://dx.doi.org/10.2139/ssrn.3281390},
year = {2020}
}

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TY  - UNPB
AB  - There is an increasing likelihood that governments of major economies will act within thenext decade to reduce greenhouse gas emissions, probably by intervening in the fossil fuelmarkets through taxation or cap & trade mechanisms (collectively “carbon pricing”). Wedevelop a model to capture the potential impact of carbon pricing on fossil fuel stocks,and use it to inform Bayesian portfolio construction methodologies, which are then used tocreate what we call Smart Carbon Portfolios. We find that investors could reduce ex-post riskby lowering the weightings of some fossil fuel stocks with corresponding higher weightingsin lower-risk fossil fuel stocks and/or in the stocks of companies active in energy efficiencymarkets. The financial costs of such de-risking strategy are found to be statistically negligiblein risk-return space. Robustness of the results is explored with alternative approaches.
AU  - Benedetti,D
AU  - Biffis,E
AU  - Chatzimichalakis,F
AU  - Lilloy,Fedele LR
AU  - Simm,I
DO  - 10.2139/ssrn.3281390
PY  - 2020///
TI  - Climate change investment risk: optimal portfolio construction ahead of the transition to a lower-carbon economy
UR  - http://dx.doi.org/10.2139/ssrn.3281390
UR  - https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=3281390
UR  - http://hdl.handle.net/10044/1/72001
ER  -

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