Huij, J., Laurs, D., Stork, P. and Zwinkels, RemcoC.J. (2026). Carbon Beta: A Market-Based Measure of Climate Transition Risk Exposure Financial Analysts Journal, 82(3):111--137.
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Affiliated authorsPhilip Stork, Remco Zwinkels
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Publication year2026
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JournalFinancial Analysts Journal
We introduce carbon beta, a measure of climate transition risk determined by a stock{\textquoteright}s return sensitivity to a pollutive-minus-clean portfolio. Carbon beta is higher for smaller and more leveraged firms, firms with more investments and fixed assets, as well as firms with lower R\&D. Carbon betas correlate with green patent issuance and other forward-looking measures of climate risk. We study the interaction of carbon beta with shocks to climate risk to judge its hedging ability: Returns to stocks with high carbon betas are lower during months with climate risk realizations.