Russia is a signatory to the Paris Climate Agreement and currently developing carbon trading options. The financial researchers wanted to find out more about the relationship between GHG emissions especially CO₂ and the profitability of carbon or carbon-free firms. They define carbon risk as

“the uncertain possibility of charging polluters for air pollution which depends on the amount of CO₂ emissions”

Reshetnikova et al, 2023 http://dx.doi.org/10.3390/jrfm16080

They evaluated existing international research about green bonds. These show lower investment returns including one study in Russia; where companies with high ESG ratings had similar returns to companies with low ESG ratings. They wanted to clarify carbon premiums in Russian stocks and risk compared with other premiums.

They developed three portfolios – carbon, carbon-free and carbon minus carbon-free. They used existing emissions data from the Federal State Statistics Service (FSSS). The data shows that the largest industrial emitters are from fossil fuel, chemical, metals and manufacturing companies. They also used indices from the Moscow Stock Exchange to develop the portfolios. They reviewed the accuracy with common statistical modelling . They found that

the carbon premium is statistically significant in the Russian stock market, but changes in CO2 emissions and air protection costs do not affect its value.

Reschetnikova et al, 2023 http://dx.doi.org/10.3390/jrfm16080370

This premium was also sensitive to the market premium for Russian stocks. CO₂ emissions and other air pollutant changes did not affect this significantly. With the carbon-free and carbon minus carbon-free there were not significantly higher investment returns, thus reducing the incentive to reduce emissions. They suggest a combination of state incentives in developing carbon emissions trading systems, potentially carbon tax and maximising efficiency of air protection costs but this needs additional research.

Reshetnikova L, Ovechkin D, Devyatkov A, Chernova G and Boldyreva N 2023 Carbon Emissions and Stock Returns: The Case of Russia Journal of Risk and Financial Management 16 370 Online: http://dx.doi.org/10.3390/jrfm16080370