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The performance of low-carbon equity funds

Kevin Birk et al.

International Review of Financial Analysis2026https://doi.org/10.1016/j.irfa.2026.105096article
AJG 3ABDC A
Weight
0.50

Abstract

This study examines the performance of low-carbon equity funds by gaining a better understanding of what drove past performance, what opportunity costs arose from higher idiosyncratic risks, and which components would shape future expectations. Low-carbon funds outperformed medium- and high-carbon funds under traditional factor models, but this advantage declined after incorporating carbon-related factors and fund characteristics. Adjusting for the opportunity costs of idiosyncratic risk particularly weakened low-carbon fund performance. Considering factor premia, exposures, characteristics, and diversification costs, investors should expect lower returns relative to a passive market-wide benchmark and roughly comparable outcomes across low-, medium-, and high-carbon funds.

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https://doi.org/https://doi.org/10.1016/j.irfa.2026.105096

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@article{kevin2026,
  title        = {{The performance of low-carbon equity funds}},
  author       = {Kevin Birk et al.},
  journal      = {International Review of Financial Analysis},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1016/j.irfa.2026.105096},
}

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The performance of low-carbon equity funds

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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