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Is There a Green Factor?

Climate change has far-reaching implications for the global economy and it is being recognized as a long-term investment theme. As more investors take note of companies that are well-positioned to handle climate change, a common factor may account, in part, for the share prices of these companies. This Research Bulletin addresses the question of whether returns to firms that are beneficiaries of climate change display common properties that are not captured by risk factors in use today. In other words, is there a green factor?