Is there a carbon emission-return relation? Exploring the existence of a carbon emission return relation in the Swedish stock market

Abstract: We use portfolio sorting and Fama-Macbeth regressions to investigate the potential relation between carbon emissions and stock returns in the Swedish stock market, a country with stringent carbon regulations and taxes. We research the Swedish stock market between 2010-2019 and do not find evidence of such a relationship. These findings indicate that the relationship between emissions and returns in Sweden differs from that in countries with less stringent carbon regulations and taxes, such as the U.S.