A0380
Title: Green commodity futures investing with style
Authors: Mascia Bedendo - University of Bologna (Italy)
Adrian Fernandez-Perez - UCD (Ireland)
Ana-Maria Fuertes - City University London (United Kingdom)
Joelle Miffre - Audencia (France) [presenting]
Abstract: This paper introduces a sustainable, style-integrated commodity portfolio designed to balance strong financial returns, leveraging cross-sectional return predictors with improved environmental outcomes by minimizing exposure to high-emission (brown) commodity futures. While the sustainable style-integrated portfolio underperforms a purely style-based portfolio in financial terms, it offers greater decarbonization benefits and enhanced resilience to climate-related risk shocks. The robustness of the framework is demonstrated across various emissions metrics, integration strategies, and tilting functions. Constrained capital flows into brown commodity futures post the 2015 Paris Agreement and hedging pressure are identified as the economic channels through which portfolio decarbonization translates into climate change mitigation.
