This study examines whether environmental (E) and overall ESG characteristics, together with carbon intensity, influence climate-related stock risk in Brazil. Using data for publicly traded firms from 2010 to 2023, we test whether high-E and high-ESG firms, as well as low-carbon companies, exhibit superior risk-adjusted returns or reduced sensitivity to climate and macroeconomic shocks. The empirical strategy employs standard and extended asset pricing models, including CAPM and Fama-French specifications, augmented with volatility and political-economic risk indices. Long-short portfolios are constructed to evaluate green-minus-brown return differentials, and MIDAS regressions incorporating high-frequency transition and physical climate risk measures provide additional robustness. Results indicate no persistent return premium associated with sustainability. However, high-E and high-ESG firms display lower exposure to climate uncertainty and macroeconomic shocks, suggesting that sustainability operates as a risk-mitigation mechanism rather than a priced factor in an emerging market setting.
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