  Using the peer-exposure ratio, we explore the factor exposure heterogeneity
in green and brown stocks. By looking at peer groups of S&P 500 index firms
over 2014-2020 based on their greenhouse gas emission levels, we find that, on
average, green stocks exhibit less factor exposure heterogeneity than brown
stocks for most of the traditional equity factors but the value factor. Hence,
investment managers shifting their investments from brown stocks to green
stocks have less room to differentiate themselves regarding their factor
exposures. Finally, we find that factor exposure heterogeneity has increased
for green stocks compared to earlier periods.
