Engle, Robert F.; Giglio, Stefano; Lee, Heebum; Kelly, … - 2019 - This version: May 7, 2019
We propose and implement a procedure to dynamically hedge climate change risk. We extract innovations from climate news … series that we construct through textual analysis of newspapers. We then use a mimicking portfolio approach to build climate … change hedge portfolios. We discipline the exercise by using third-party ESG scores of firms to model their climate risk …