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Performance of energy ETFs and climate risks

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  • 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.

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  • Nguyen, Minh Nhat & Liu, Ruipeng & Li, Youwei, 2025. "Performance of energy ETFs and climate risks," Energy Economics, Elsevier, vol. 141(C).
    • Handle: RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324007400
    DOI: 10.1016/j.eneco.2024.108031
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    1. Vassilios Babalos & Xolani Sibande & Elie Bouri & Rangan Gupta, 2025. "Do Investors in Clean Energy ETFs Herd? The Role of Climate Risks," Working Papers 202512, University of Pretoria, Department of Economics.

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    More about this item

    Keywords

    Clean energy ETFs; Fossil fuel ETFs; Climate risks; Inequality tests; Portfolio returns; Semibeta; idiosyncratic risks;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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