Journal of Banking & Finance Vol. 184 2026
Sustainability in commodity markets
Abstract
We examine the asset pricing implications of sustainability in commodity markets. We focus on metals and agricultural goods, for which we collect production-based environmental footprint data, namely greenhouse gas emissions and water consumption. We then build green-minus-brown portfolios and find no evidence that sustainability is priced in the cross-section of metals’ and agricultural commodities’ returns. We also document strong welfare benefits when diversifying equity and bond allocations with low-carbon commodities. Investor welfare, measured by the certainty equivalent return, increases by 22% when the commodity share is 20%. These results reveal the dual opportunities, both financial and environmental, brought by low footprint commodities.
- DOI
- 10.1016/j.jbankfin.2025.107599
- Volume
- 184
- Pages
- 107599
- Language
- en
- Sources
- openalex crossref