Performance of energy ETFs and climate risks

Nguyen, Minh Nhat; Liu, Ruipeng; Li, Youwei

Abstract

We investigate whether green (brown) portfolios constructed from clean energy ETFs (fossil fuel ETFs) yield positive (negative) returns conditional on climate-related risks. While the green portfolios do not unconditionally outperform the brown ones, the outperformance of green portfolios is statistically significant under the conditional setting using non-parametric estimates with imposing inequality restrictions. Our conditional studies also show that brown portfolios are riskier than green ones with various measurements. We present the heterogeneity in the effect of climate information on the return and risk of green and brown portfolios. Furthermore, we document that fund flows for green assets are higher than those for brown ones during periods of high climate risks. Our findings are robust to alternative specifications.

Citation

Nguyen, M. N., Liu, R., & Li, Y. (2025). Performance of energy ETFs and climate risks. Energy Economics, 141, Article 108031. https://doi.org/10.1016/j.eneco.2024.108031

• Journal Article Type: Article
• Acceptance Date: Oct 28, 2024
• Online Publication Date: Nov 8, 2024
• Publication Date: Jan 1, 2025
• Deposit Date: Nov 9, 2024
• Publicly Available Date: Nov 11, 2024
• Journal: Energy Economics
• Print ISSN: 0140-9883
• Electronic ISSN: 1873-6181
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 141
• Article Number: 108031
• DOI: https://doi.org/10.1016/j.eneco.2024.108031
• Keywords: Clean energy ETFs; Fossil fuel ETFs; Climate risks; Inequality tests; Portfolio returns; Semibeta, idiosyncratic risks
• Public URL: https://hull-repository.worktribe.com/output/4911738