How climate news affects investment returns

Alex Fidgeon-Keeler, ESG Research Analyst (London)

Post feature

The transition to a low-carbon economy seems to gain urgency with each headline about the latest climate extreme. In this literature review, we summarise a study that investigates the relationship between unexpected climate news and equity performance, aiming to quantify climate beta.


The paper aims to measure climate change beta by deriving climate news indices from multiple sources with various natural-language processing (NLP) methodologies. It quantitatively assesses unexpected climate change news and evaluates the effect on asset returns.

Climate beta is used to assess investors’ climate change exposure based on a portfolio’s sensitivity to the transition to a low-carbon economy.

  • The authors create 25 unexpected climate news indices (UCNI), one for each underlying news source and model. They also create an aggregated UCNI across all news sources.
  • Constituents of the S&P 500 were ranked based on carbon intensity to create “green”, “brown” and “green-minus-brown” (GMB) portfolios.
  • The findings show a negative relationship between brown portfolio returns and the aggregated UCNI of all five sources. No significant relationships were found for green portfolios.

Request a Neudata trial

We'd like to know a bit more about you and your business, so we can deal with your request efficiently.
We take your privacy seriously and handle your personal data in line with our privacy statement.

We use your email address as part of allowing you access to your account and in order to provide you details with our products that might be of interest to you