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Sustainability in commodity markets
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DOI：10.1016/j.jbankfin.2025.107599.png)
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Abstract
En 中文
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.
Keywords:
Q02
Q54
G11
G13
G12
Sustainability
Commodity markets
Environmental footprint
Investor welfare
Diversification
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