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2Swedloe, 2/7/22, Advisor Perspectives. “The carbon premium is economically significant: A one-standard-deviation (SD) increase in the level and change of scope 1 emissions leads to a 1.8% and 3.1% increase, respectively, in annualized stock returns. A one SD increase in the level and change of scope 2 emissions leads to a 2.9% and 2.2% increase in annualized returns. And a one SD increase in the level and change of scope 3 emissions increases stock returns 4.0% and 3.8% on an annualized basis.”
3 Walkshäusl, “Carbon Momentum,” Fall 2021 issue of The Journal of Impact and ESG Investing. https://jesg.pm-research.com/content/2/1/33. This study separated this data and re-ran the testing, the risk premium (better stock performance) only showed up using the data from vendor estimations. When the researchers analyzed the vendor data, they found the vendors' method for estimating a company's GHG emissions strongly correlated to company sales and assets, which correlated to higher stock performance.
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