The Importance of Climate Risks for Institutional Investors

By Philipp Krueger, Zacharias Sautner, Laura T. Starks. The Review of financial studies, 2020

2,030 citations recorded by the source corpus.

According to our survey about climate risk perceptions, institutional investors believe climate risks have financial implications for their portfolio firms and that these risks, particularly regulatory risks, already have begun to materialize. Many of the investors, especially the long-term, larger, and ESG-oriented ones, consider risk management and engagement, rather than divestment, to be the better approach for addressing climate risks. Although surveyed investors believe that some equity valuations do not fully reflect climate risks, their perceived overvaluations are not large.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/c48536eb997e5ab9d4b1c86c540ba8ca2fee08ec

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Citations in the corpus

Aggregate Confusion: The Divergence of ESG Ratings (2020, background): “These results are consistent with Semenova and Hassel (2015), Chatterji et al.”
Greening Through Finance? (2021, background): “…bond markets (Sharfman and Fernando, 2008; Bauer and Hann, 2010; Baker et al., 2018), stock markets (Hong and Kacperczyk, 2009), shareholders (Tang and Zhang, 2020), institutional investors (Krueger et al., 2019), mutual funds (Riedl and Smeets, 2017), and private banks (Goss and Roberts, 2011).”
Common Ownership, Competition, and Top Management Incentives (2016, neutral): “, 2020; Coffee, 2020), including climate change and race issues (Krueger et al., 2020; Condon, 2020; Shekita, 2020).”
Dissecting Climate Risks: Are they Reflected in Stock Prices? (2021, positive): “These results are in line with the findings in Krueger et al. (2020) and Bolton and Kacperczyk (2021a), who also conclude that the pricing of climate risk is a recent phenomenon.”
Green Bonds: Effectiveness and Implications for Public Policy (2019, background): “…trend, a recent survey of institutional investors paints a striking picture: the majority of surveyed investors believe that climate risk reporting is as important asfinancial reporting, and one-third believe that climate risk reporting is even more important (Krueger, Sautner, and Starks 2018).”
Carbon risk and corporate capital structure (2020, positive): “Control variables consist of firm characteristics that are documented to have power to explain firm capital structure, which include size (Log(BA)), growth opportunities (MB/BA), profitability (EBIT/BA), and tangibility (PP&E/BA) (Rajan and Zingales (1995), Leary and Roberts (2014), Simintzi, Vig, a”
Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections (2021, positive): “…the role of institutional investor horizon and tastes on ESG investing decisions (Dyck et al., 2019; Fernando, Sharfman, and Uysal, 2017; Gibson, Krueger, and Mitali, 2020; Hwang, Titman, and Wang, 2017; Ilhan et al., 2020; Krüger, Sautner, and Starks, 2020; and Starks, Venkat, and Zhu, 2020).”
Climate Regulatory Risks and Corporate Bonds (2020, positive): “1 In fact, research shows that climate risk is an important factor in institutional investor decisions and it affects firm leverage, the tail risk of stocks and the pricing of stocks and municipal bonds in the cross-section (Krüger et al., 2019; Ginglinger and Moreau, 2019; Ilhan et al., 2019; Bolto”
Climate Change News Risk and Corporate Bond Returns (2020, positive): “In contrast, corporate bonds are predominantly held by institutional investors (Bai et al. (2019)), who are likely to pay attention to climate risk in all its forms (Krüeger et al. (2020)).”