Financial markets process complex information every day. The impact of climate change is no exception.
Academic research provides compelling evidence that prices in a variety of asset markets incorporate information about climate risk.
These findings also suggest that firms have incentives to manage their climate risk exposure, as a higher exposure can result in a higher cost of capital.
The economic effects of climate change may be substantial—and may unfold over decades. Climate change can, therefore, affect the future payoffs of a wide range of assets. Given this strong potential impact, a central question is whether markets do a good job of reflecting climate risk in asset prices. Since the effects of climate change are uncertain and potentially long-lasting, some worry that markets might struggle incorporating information about climate risk. Let’s not forget, however, that financial markets assess many other complex and uncertain events every day. Examples include the potential changes in consumer demand and business practices after the pandemic, the impact of current stimulus spending on future inflation, the evolution of international political and trade relations, and the impact of technological innovation.
Since the pioneering work of Fama et al. (1969), ample academic research has shown that financial markets are remarkably good at processing new information.1 Thanks to intense competition among many market participants globally, prices quickly reflect news about the economy, scientific advances, and geopolitical developments. What about climate risk? It appears to be no exception. As we document in a recent Dimensional paper, research shows that prices in a variety of asset markets incorporate information about climate risk.
PRICING OF PHYSICAL RISK
Physical risk refers to the direct effects of climate change; a coastal property exposed to increased flooding risk would be an example. Painter (2020) notes that municipal bonds offer an interesting setting to study exposure to physical risk, since, unlike corporations, municipalities cannot relocate to avoid the physical effects of climate change. His study, along with Goldsmith-Pinkham et al. (2020), finds that higher exposure to sea level rise is associated with higher municipal bond yields. Importantly, the relation is mostly driven by long-maturity bonds. These results suggest that investors do consider the long-term effects of climate change.
The real estate market offers another important source of evidence. Like municipalities, buildings are essentially impossible to relocate and exposed to physical risk. Bernstein et al. (2019) find that houses exposed to sea level rise sell at a 7% discount to properties with similar characteristics. Interestingly, most of the discount is driven by houses not at risk of being flooded for another 50 years. Even in decentralized, less-liquid markets such as real estate, there is evidence that prices reflect long-run climate risk.
The futures market also provides evidence that investors price the physical risks of climate change. Schlenker and Taylor (2019) look at climate futures traded on the Chicago Mercantile Exchange between 2002 and 2018. The key finding of the study is that warming trends predicted from climate models, inferred from futures prices, and measured from observed temperatures all coincide. The study thus shows that investors transacting in the climate futures market have expectations in line with the scientific consensus. The setting also allows the authors to confirm that these investors do not systematically underestimate or overestimate future temperatures.
PRICING OF TRANSITIONAL RISK
Transitional risk arises because of the uncertainty surrounding the transition to a lowcarbon economy. There is uncertainty, for instance, around both the timing and scope of new environmental regulations. As a result, firms whose business models depend on high fossil fuel use are likely to have high exposure to transitional risk.
Griffin et al. (2015) find that the stock prices of the 63 largest US oil and gas energy firms fell by 1.5% to 2% after the publication of a landmark paper in Nature (Meinshausen et al., 2009). The latter paper argues that most fossil fuel reserves would need to remain untouched if warming is to be kept under 2°C by 2050; for comparison, the objective under the Paris Agreement is to limit all future warming at 2°C, an even more stringent objective. Therefore, most reserves would become worthless under aggressive mitigation policies. Consistent with the idea that asset prices reflect climate risk, markets reacted in the three days following the publication of the article in 2009, although the article was only publicized by the press a few years later.
Looking at other examples of transitional risk, Chava (2014) finds that firms with negative environmental externalities face a higher cost of capital, while Delis et al. (2019) contend that fossil fuel firms incur higher interest rates on syndicated bank loans. In both cases, the mechanism in question has to do not with the direct effect of global warming on firm performance, but rather with potential regulatory or reputational risk. Ilhan et al. (2021) find that equity option prices reflect climate policy uncertainty and that downside risk is costlier to insure for more carbon-intensive firms. Seltzer et al. (2020) look at regulatory risk specifically and find that the bonds of firms with a poor environmental record were more likely to experience rating downgrades and yield increases after the passage of the Paris Agreement. All these studies suggest that asset prices reflect the potential impact of climate policy or changing consumer tastes.
Overall, a growing body of evidence shows that prices across many different markets (stocks, bonds, climate futures, equity options, and real estate) incorporate information about climate risk. This pattern is consistent with the behavior we would expect in competitive markets: buyers and sellers have incentives to use all the information at their disposal to value assets, and the literature suggests that information about climate change is no exception.
These results are also encouraging news for everyone concerned about climate change. Financial markets seem to pay attention to climate risk despite its complexity. Moreover, competitive market forces provide firms with incentives to better manage their exposure to climate risk to reduce their cost of capital.
1. For an overview of the event study methodology and its application to financial markets, see, for instance, Fama (2014). Fama (1991) reviews the early evidence on the adjustment of market prices to new information and finds that “[t]he typical result in event studies on daily data is that, on average, stock prices seem to adjust within a day to event announcements.” More recent contributions include Busse and Green (2002), Hasbrouck (2003), Chordia et al. (2005), Kelley and Tetlock (2013), Brogaard and Hendershott (2014), and Hendershott et al. (2015), to name a few.
REFERENCES
Bernstein, Asaf, Matthew T. Gustafson, and Ryan Lewis. 2019. “Disaster on the Horizon: The Price Effect of Sea Level Rise.” Journal of Financial Economics 134, no. 2: 253–272.
Brogaard, Jonathan, Terrence Hendershott, and Ryan Riordan. 2014. “High-Frequency Trading and Price Discovery.” Review of Financial Studies 27, no. 8: 2267–2306.
Busse, Jeffrey A., and T. Clifton Green. 2002. “Market Efficiency in Real Time.” Journal of Financial Economics 65, no. 3: 415–437.
Chava, Sudheer. 2014. “Environmental Externalities and Cost of Capital.” Management Science 60, no. 9: 2223–2247.
Chordia, Tarun, Richard Roll, and Avanidhar Suburahmanyam. 2005. “Evidence on the Speed of Convergence to Market Efficiency.”Journal of Financial Economics 76, no. 2: 271–292.
Delis, Manthos D., Kathrin de Greiff, and Steven Ongena. 2019. “Being Stranded with Fossil Fuel Reserves? Climate Policy Risk and the Pricing of Bank Loans.” EBRD Working Paper 231.
Fama, Eugene, Lawrence Fisher, Michael C. Jensen, and Richard Roll. 1969. “The Adjustment of Stock Prices to New Information.”International Economic Review 10, no. 1: 1–21.
Fama, Eugene F. 1991.“Efficient Capital Markets: II.” Journal of Finance 46, no. 5: 1575–1617.Fama, Eugene F. 2014. “Two Pillars of Asset Pricing.” American Economic Review 104, no. 6: 1467–1485.
Fama, Eugene F., and Kenneth R. French. 2010. “Luck Versus Skill in the Cross-Section of Mutual Fund Returns.” Journal of Finance 65, no.5: 1915–1947.
Goldsmith-Pinkham, Paul S., Matthew Gustafson, Ryan Lewis, and Michael Schwert. 2020. “Sea Level Rise Exposure and Municipal Bond Yields.” Available at SSRN: 3478364.
Griffin, Paul A., et al. 2015. “Science and the Stock Market: Investors’ Recognition of Unburnable Carbon.” Energy Economics 52, part A: 1–12.Hasbrouck, Joel. 2003. “Intraday Price Formation in US Equity Index Markets.” Journal of Finance 58, no. 6: 2375–2400.
Hendershott, Terrence, Dmitry Livdan, and Norman Schurhoff. 2015. “Are Institutions Informed About News?” Journal of Financial Economics 117, no. 2: 249–287.
Kelley, Eric K., and Paul C. Tetlock. 2013. “How Wise Are Crowds? Insights from Retail Orders and Stock Returns.” Journal of Finance 68, no. 3: 1229–1265.
Ilhan, Emirhan, Zacharias Sautner, and Grigory Vilkov. 2021. “Carbon Tail Risk.” Review of Financial Studies 34, no. 3: 1540–1571.
Meinshausen, Malte, et al. 2009. “Greenhouse-Gas Emission Targets for Limiting Global Warming to 2°C.” Nature 458, no. 7242: 1158–1162.
Painter, Marcus. 2020. “An Inconvenient Cost: The Effects of Climate Change on Municipal Bonds.” Journal of Financial Economics 135, no. 2: 468–482.
Seltzer, Lee, Laura T. Starks, and Qifei Zhu. 2020. “Climate Regulatory Risks and Corporate Bonds.” Available at SSRN 3563271.
Schlenker, Wolfram, and Charles A. Taylor. 2019. “Market Expectations About Climate Change.” NBER Working Paper No. 25554.
Eugene Fama is a member of the Board of Directors of the general partner of, and provides consulting services to, Dimensional Fund Advisors LP.
The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.
“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. This material is not a sales communication. It is provided for educational purposes only, should not be construed as investment advice or an offer of any security for sale and does not represent a recommendation of any particular security, strategy or investment product. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or other distributions and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.
WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED OR DIMENSIONAL FUND ADVISORS LTD.Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.
NOTICE TO INVESTORS IN SWITZERLAND: This is an advertising document.
WHERE ISSUED BY DIMENSIONAL IRELAND LIMITEDIssued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. DIL is regulated by the Central Bank of Ireland (Registration No. C185067). Information and opinions presented in this material have been obtained or derived from sources believed by DIL to be reliable, and DIL has reasonable grounds to believe that all factual information herein is true as at the date of this document. DIL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DIL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.
WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.Issued by Dimensional Fund Advisors Ltd. (DFAL), 20 Triton Street, Regent’s Place, London, NW1 3BF. DFAL is authorised and regulated by the Financial Conduct Authority (FCA). Information and opinions presented in this material have been obtained or derived from sources believed by DFAL to be reliable, and DFAL has reasonable grounds to believe that all factual information herein is true as at the date of this document.
DFAL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DFAL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.
RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.
JAPAN
Provided for institutional investors only. This document is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. This material is solely for informational purposes only and shall not constitute an offer to sell or the solicitation to buy securities or enter into investment advisory contracts. The material in this article and any content contained herein may not be reproduced, copied, modified, transferred, disclosed, or used in any way not expressly permitted by Dimensional Japan Ltd. in writing. All expressions of opinion are subject to change without notice.Dimensional Japan Ltd.Director of Kanto Local Finance Bureau (FIBO) No. 2683Membership: Japan Investment Advisers Association
FOR PROFESSIONAL INVESTORS IN HONG KONG.
This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence, or otherwise) the publication or availability of this material are prohibited or which would subject Dimensional Hong Kong (including its affiliates) or any of Dimensional Hong Kong’s products or services to any registration, licensing, or other such legal requirements within such jurisdiction or country. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice.
Unauthorized copying, reproducing, duplicating, or transmitting of this material are prohibited. This material and the distribution of this material are not intended to constitute and do not constitute an offer or an invitation to offer to the Hong Kong public to acquire, dispose of, subscribe for, or underwrite any securities, structured products, or related financial products or instruments nor investment advice thereto. Any opinions and views expressed herein are subject to change. Neither Dimensional Hong Kong nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors. Financial advisors in Hong Kong shall not actively market the services of Dimensional Hong Kong or its affiliates to the Hong Kong public.
SINGAPOREThis material is deemed to be issued by Dimensional Fund Advisors Pte. Ltd., which is regulated by the Monetary Authority of Singapore and holds a capital markets services license for fund management.
This advertisement has not been reviewed by the Monetary Authority of Singapore. This information should not be considered investment advice or an offer of any security for sale. All information is given in good faith without any warranty and is not intended to provide professional, investment, or any other type of advice or recommendation and does not take into account the particular investment objectives, financial situation, or needs of individual recipients. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice. Dimensional Fund Advisors Pte. Ltd. does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein. Neither 6 Dimensional Fund Advisors Please see the end of this document for important disclosures. Dimensional Fund Advisors Pte. Ltd. nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors.
Climate Change and Asset Prices
KEY TAKEAWAYS
The economic effects of climate change may be substantial—and may unfold over decades. Climate change can, therefore, affect the future payoffs of a wide range of assets. Given this strong potential impact, a central question is whether markets do a good job of reflecting climate risk in asset prices. Since the effects of climate change are uncertain and potentially long-lasting, some worry that markets might struggle incorporating information about climate risk. Let’s not forget, however, that financial markets assess many other complex and uncertain events every day. Examples include the potential changes in consumer demand and business practices after the pandemic, the impact of current stimulus spending on future inflation, the evolution of international political and trade relations, and the impact of technological innovation.
Since the pioneering work of Fama et al. (1969), ample academic research has shown that financial markets are remarkably good at processing new information.1 Thanks to intense competition among many market participants globally, prices quickly reflect news about the economy, scientific advances, and geopolitical developments. What about climate risk? It appears to be no exception. As we document in a recent Dimensional paper, research shows that prices in a variety of asset markets incorporate information about climate risk.
PRICING OF PHYSICAL RISK
Physical risk refers to the direct effects of climate change; a coastal property exposed to increased flooding risk would be an example. Painter (2020) notes that municipal bonds offer an interesting setting to study exposure to physical risk, since, unlike corporations, municipalities cannot relocate to avoid the physical effects of climate change. His study, along with Goldsmith-Pinkham et al. (2020), finds that higher exposure to sea level rise is associated with higher municipal bond yields. Importantly, the relation is mostly driven by long-maturity bonds. These results suggest that investors do consider the long-term effects of climate change.
The real estate market offers another important source of evidence. Like municipalities, buildings are essentially impossible to relocate and exposed to physical risk. Bernstein et al. (2019) find that houses exposed to sea level rise sell at a 7% discount to properties with similar characteristics. Interestingly, most of the discount is driven by houses not at risk of being flooded for another 50 years. Even in decentralized, less-liquid markets such as real estate, there is evidence that prices reflect long-run climate risk.
The futures market also provides evidence that investors price the physical risks of climate change. Schlenker and Taylor (2019) look at climate futures traded on the Chicago Mercantile Exchange between 2002 and 2018. The key finding of the study is that warming trends predicted from climate models, inferred from futures prices, and measured from observed temperatures all coincide. The study thus shows that investors transacting in the climate futures market have expectations in line with the scientific consensus. The setting also allows the authors to confirm that these investors do not systematically underestimate or overestimate future temperatures.
PRICING OF TRANSITIONAL RISK
Transitional risk arises because of the uncertainty surrounding the transition to a lowcarbon economy. There is uncertainty, for instance, around both the timing and scope of new environmental regulations. As a result, firms whose business models depend on high fossil fuel use are likely to have high exposure to transitional risk.
Griffin et al. (2015) find that the stock prices of the 63 largest US oil and gas energy firms fell by 1.5% to 2% after the publication of a landmark paper in Nature (Meinshausen et al., 2009). The latter paper argues that most fossil fuel reserves would need to remain untouched if warming is to be kept under 2°C by 2050; for comparison, the objective under the Paris Agreement is to limit all future warming at 2°C, an even more stringent objective. Therefore, most reserves would become worthless under aggressive mitigation policies. Consistent with the idea that asset prices reflect climate risk, markets reacted in the three days following the publication of the article in 2009, although the article was only publicized by the press a few years later.
Looking at other examples of transitional risk, Chava (2014) finds that firms with negative environmental externalities face a higher cost of capital, while Delis et al. (2019) contend that fossil fuel firms incur higher interest rates on syndicated bank loans. In both cases, the mechanism in question has to do not with the direct effect of global warming on firm performance, but rather with potential regulatory or reputational risk. Ilhan et al. (2021) find that equity option prices reflect climate policy uncertainty and that downside risk is costlier to insure for more carbon-intensive firms. Seltzer et al. (2020) look at regulatory risk specifically and find that the bonds of firms with a poor environmental record were more likely to experience rating downgrades and yield increases after the passage of the Paris Agreement. All these studies suggest that asset prices reflect the potential impact of climate policy or changing consumer tastes.
Overall, a growing body of evidence shows that prices across many different markets (stocks, bonds, climate futures, equity options, and real estate) incorporate information about climate risk. This pattern is consistent with the behavior we would expect in competitive markets: buyers and sellers have incentives to use all the information at their disposal to value assets, and the literature suggests that information about climate change is no exception.
These results are also encouraging news for everyone concerned about climate change. Financial markets seem to pay attention to climate risk despite its complexity. Moreover, competitive market forces provide firms with incentives to better manage their exposure to climate risk to reduce their cost of capital.
VIEW THE RESEARCH ON SSRN
1. For an overview of the event study methodology and its application to financial markets, see, for instance, Fama (2014). Fama (1991) reviews the early evidence on the adjustment of market prices to new information and finds that “[t]he typical result in event studies on daily data is that, on average, stock prices seem to adjust within a day to event announcements.” More recent contributions include Busse and Green (2002), Hasbrouck (2003), Chordia et al. (2005), Kelley and Tetlock (2013), Brogaard and Hendershott (2014), and Hendershott et al. (2015), to name a few.
REFERENCES
Bernstein, Asaf, Matthew T. Gustafson, and Ryan Lewis. 2019. “Disaster on the Horizon: The Price Effect of Sea Level Rise.” Journal of Financial Economics 134, no. 2: 253–272.
Brogaard, Jonathan, Terrence Hendershott, and Ryan Riordan. 2014. “High-Frequency Trading and Price Discovery.” Review of Financial Studies 27, no. 8: 2267–2306.
Busse, Jeffrey A., and T. Clifton Green. 2002. “Market Efficiency in Real Time.” Journal of Financial Economics 65, no. 3: 415–437.
Chava, Sudheer. 2014. “Environmental Externalities and Cost of Capital.” Management Science 60, no. 9: 2223–2247.
Chordia, Tarun, Richard Roll, and Avanidhar Suburahmanyam. 2005. “Evidence on the Speed of Convergence to Market Efficiency.” Journal of Financial Economics 76, no. 2: 271–292.
Delis, Manthos D., Kathrin de Greiff, and Steven Ongena. 2019. “Being Stranded with Fossil Fuel Reserves? Climate Policy Risk and the Pricing of Bank Loans.” EBRD Working Paper 231.
Fama, Eugene, Lawrence Fisher, Michael C. Jensen, and Richard Roll. 1969. “The Adjustment of Stock Prices to New Information.” International Economic Review 10, no. 1: 1–21.
Fama, Eugene F. 1991.“Efficient Capital Markets: II.” Journal of Finance 46, no. 5: 1575–1617. Fama, Eugene F. 2014. “Two Pillars of Asset Pricing.” American Economic Review 104, no. 6: 1467–1485.
Fama, Eugene F., and Kenneth R. French. 2010. “Luck Versus Skill in the Cross-Section of Mutual Fund Returns.” Journal of Finance 65, no.5: 1915–1947.
Goldsmith-Pinkham, Paul S., Matthew Gustafson, Ryan Lewis, and Michael Schwert. 2020. “Sea Level Rise Exposure and Municipal Bond Yields.” Available at SSRN: 3478364.
Griffin, Paul A., et al. 2015. “Science and the Stock Market: Investors’ Recognition of Unburnable Carbon.” Energy Economics 52, part A: 1–12. Hasbrouck, Joel. 2003. “Intraday Price Formation in US Equity Index Markets.” Journal of Finance 58, no. 6: 2375–2400.
Hendershott, Terrence, Dmitry Livdan, and Norman Schurhoff. 2015. “Are Institutions Informed About News?” Journal of Financial Economics 117, no. 2: 249–287.
Kelley, Eric K., and Paul C. Tetlock. 2013. “How Wise Are Crowds? Insights from Retail Orders and Stock Returns.” Journal of Finance 68, no. 3: 1229–1265.
Ilhan, Emirhan, Zacharias Sautner, and Grigory Vilkov. 2021. “Carbon Tail Risk.” Review of Financial Studies 34, no. 3: 1540–1571.
Meinshausen, Malte, et al. 2009. “Greenhouse-Gas Emission Targets for Limiting Global Warming to 2°C.” Nature 458, no. 7242: 1158–1162.
Painter, Marcus. 2020. “An Inconvenient Cost: The Effects of Climate Change on Municipal Bonds.” Journal of Financial Economics 135, no. 2: 468–482.
Seltzer, Lee, Laura T. Starks, and Qifei Zhu. 2020. “Climate Regulatory Risks and Corporate Bonds.” Available at SSRN 3563271.
Schlenker, Wolfram, and Charles A. Taylor. 2019. “Market Expectations About Climate Change.” NBER Working Paper No. 25554.
Eugene Fama is a member of the Board of Directors of the general partner of, and provides consulting services to, Dimensional Fund Advisors LP.
The information in this document is provided in good faith without any warranty and is intended for the recipient’s background information only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized copying, reproducing, duplicating, or transmitting of this document are strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.
“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
UNITED STATES: Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
CANADA: These materials have been prepared by Dimensional Fund Advisors Canada ULC. This material is not a sales communication. It is provided for educational purposes only, should not be construed as investment advice or an offer of any security for sale and does not represent a recommendation of any particular security, strategy or investment product. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or other distributions and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
AUSTRALIA and NEW ZEALAND: This material is issued by DFA Australia Limited (AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.
WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED OR DIMENSIONAL FUND ADVISORS LTD. Neither Dimensional Ireland Limited (DIL) nor Dimensional Fund Advisors Ltd. (DFAL), as applicable (each an “Issuing Entity,” as the context requires), give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.
NOTICE TO INVESTORS IN SWITZERLAND: This is an advertising document.
WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED Issued by Dimensional Ireland Limited (DIL), with registered office 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. DIL is regulated by the Central Bank of Ireland (Registration No. C185067). Information and opinions presented in this material have been obtained or derived from sources believed by DIL to be reliable, and DIL has reasonable grounds to believe that all factual information herein is true as at the date of this document. DIL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DIL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.
WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD. Issued by Dimensional Fund Advisors Ltd. (DFAL), 20 Triton Street, Regent’s Place, London, NW1 3BF. DFAL is authorised and regulated by the Financial Conduct Authority (FCA). Information and opinions presented in this material have been obtained or derived from sources believed by DFAL to be reliable, and DFAL has reasonable grounds to believe that all factual information herein is true as at the date of this document.
DFAL issues information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from DFAL will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.
RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.
JAPAN
Provided for institutional investors only. This document is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as a Financial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business. This material is solely for informational purposes only and shall not constitute an offer to sell or the solicitation to buy securities or enter into investment advisory contracts. The material in this article and any content contained herein may not be reproduced, copied, modified, transferred, disclosed, or used in any way not expressly permitted by Dimensional Japan Ltd. in writing. All expressions of opinion are subject to change without notice. Dimensional Japan Ltd. Director of Kanto Local Finance Bureau (FIBO) No. 2683 Membership: Japan Investment Advisers Association
FOR PROFESSIONAL INVESTORS IN HONG KONG.
This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not directed to any person in any jurisdiction where (by reason of that person’s nationality, residence, or otherwise) the publication or availability of this material are prohibited or which would subject Dimensional Hong Kong (including its affiliates) or any of Dimensional Hong Kong’s products or services to any registration, licensing, or other such legal requirements within such jurisdiction or country. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis. Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice.
Unauthorized copying, reproducing, duplicating, or transmitting of this material are prohibited. This material and the distribution of this material are not intended to constitute and do not constitute an offer or an invitation to offer to the Hong Kong public to acquire, dispose of, subscribe for, or underwrite any securities, structured products, or related financial products or instruments nor investment advice thereto. Any opinions and views expressed herein are subject to change. Neither Dimensional Hong Kong nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors. Financial advisors in Hong Kong shall not actively market the services of Dimensional Hong Kong or its affiliates to the Hong Kong public.
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