Carb-on or Carb-off? : Carbon-intensive stocks' performance in an age of socially responsible investing

Abstract: This study investigates the performance of carbon-intensive stocks in the United States and provides evidence of abnormal returns between 2000 and 2019. However, these abnormal returns are isolated to the period 2000 to 2002 which coincides with the Dot-com crash. After the financial crisis of 2008, the measured alpha is negative, but on a statistically insignificant level. This may stem from deteriorating firm value from increasing environmental and regulatory risks, and the sell-off by institutional investors. In this industry-based analysis, industries were evaluated both quantitatively and qualitatively on their emissions before being included in a carbon index. The carbon index was then analyzed using multi-factor models.