This doctoral thesis consists of four chapters that contribute to research agendas in international macroeconomics and finance. The first and last chapters shed light on the drivers of institutional investors’ portfolio allocation. Chapter 1 studies how changes in European carbon prices impact mutual funds’ stock holdings of carbon-intensive firms. Chapter 4 constructs a novel dataset on large pension funds across the world, to assess their financial risk-taking during the low interest rate environment of the early 2000s. Chapters 2 and 3 study the macroeconomic impacts of carbon pricing, which is increasingly used as a tool to mitigate the effects of climate change. The second chapter asks to what extent carbon taxes enacted in European countries and Canadian provinces contributed to overall inflation. The third chapter contrasts the economic and emission impacts of carbon taxes in Europe with price changes in the European Emissions Trading System. All chapters have a strong empirical focus, addressing policy-relevant research questions through rigorous and careful analysis applied to novel, often micro-level data.