Zoom link: https://darden-virginia.zoom.us/j/96249829459.

Decarbonizing Institutional Investor Portfolios

by Vaska Atta-Darkua, Simon Glossner, Philipp Krueger, Pedro Matos

Combining global data on institutional investors’ equity holdings and firm-level carbon emissions, we study whether and how climate-conscious institutions reduce the carbon emissions of their equity portfolios. We find that institutions actively decarbonized their equity portfolios between 2005 and 2019. We hypothesize that institutions could either decarbonize via tilting their holdings towards lower emitting firms or via engaging their portfolio firms to curb emissions. Our analysis suggests that tilting is the predominant strategy used by institutions. Given that tilting does not reduce the negative externality of firm-level carbon emissions, our analysis raises doubts about the effectiveness of institutional investors in reducing the negative impact of firm-level carbon emissions on climate change