@article {Hao53, author = {Bill Hao and Aye M. Soe and Kelly Tang}, title = {Carbon Risk Integration with Factors}, volume = {9}, number = {2}, pages = {53--65}, year = {2018}, doi = {10.3905/jii.2018.1.061}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Integration of carbon risks into the investment process requires careful analysis of risk{\textendash}return characteristics and factor exposures of resulting carbon-efficient portfolios. In this article, we propose a stylized framework to integrate traditional style factors with carbon-efficient portfolios for both U.S and developed Europe markets. The results show that although carbon-efficient factor portfolios do achieve the objective of lowering carbon intensity, they generally have lower risk-adjusted returns than the pure factor portfolios. In addition, carbon-efficient factor portfolios have lower exposure to the targeted factors, and the reductions in factor exposure are statistically significant.TOPICS: Analysis of individual factors/risk premia, ESG investing, developed}, issn = {2154-7238}, URL = {https://jii.pm-research.com/content/9/2/53}, eprint = {https://jii.pm-research.com/content/9/2/53.full.pdf}, journal = {The Journal of Beta Investment Strategies} }