CO2 efficient investment strategies

  • Thor Santana Imstoel (Student)

Student thesis: Master's Thesis


How do investments that incorporate carbon emission footprints on their portfolio selection perform? One line of argumentation reasons that corporate initiatives to reduce greenhouse gas emissions could indicate agency problems, which should result in lower performance of environmentally friendly firms. In contrast, it could be argued that firms that have a high environmental performance achieve their results by making their value chains more efficient, which enhances the performance of a firm. This research paper evaluates portfolio strategies based on CO2 efficiency, which is proxied by the ratio of CO2 emissions divided by revenues. I form portfolios that are sorted on CO2 efficiency in 9 different ways in North America and Europe respectively. The performance of portfolios is assessed through four different asset pricing models. The results indicate that portfolios sorted on high CO2 efficiency and portfolios that buys efficient and sells inefficient stocks in North America tended to produce positive abnormal returns from 2008 to 2019. The findings are significant through robustness checks. My results do not show over performance in Europe during the same time, and the models generally exhibit results with lower explanatory power. The results are in line with and provide support to research that constructs portfolios sorted on environmental performance in the US.
Date of Award14 Oct 2020
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorEva Schliephake (Supervisor)


  • Socially responsible investing
  • Low-carbon investing
  • Multi-factor asset pricing model


  • Mestrado em Finanças

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