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Sustainability in commodity markets

Author

Listed:
  • Coqueret, Guillaume
  • Tavin, Bertrand
  • Zhou, Yuxin

Abstract

We examine the asset pricing implications of sustainability in commodity markets. We focus on metals and agricultural goods, for which we collect production-based environmental footprint data, namely greenhouse gas emissions and water consumption. We then build green-minus-brown portfolios and find no evidence that sustainability is priced in the cross-section of metals’ and agricultural commodities’ returns. We also document strong welfare benefits when diversifying equity and bond allocations with low-carbon commodities. Investor welfare, measured by the certainty equivalent return, increases by 22% when the commodity share is 20%. These results reveal the dual opportunities, both financial and environmental, brought by low footprint commodities.

Suggested Citation

  • Coqueret, Guillaume & Tavin, Bertrand & Zhou, Yuxin, 2026. "Sustainability in commodity markets," Journal of Banking & Finance, Elsevier, vol. 184(C).
    • Handle: RePEc:eee:jbfina:v:184:y:2026:i:c:s0378426625002195
    DOI: 10.1016/j.jbankfin.2025.107599
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    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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