Do investors find carbon information useful? Evidence from Italian firms (original) (raw)
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Journal of Business Finance & Accounting, 2016
This paper empirically assesses the value relevance of information on corporate climate change disclosure and performance to asset prices, and discusses whether this information is priced appropriately. Findings indicate that corporate disclosures of quantitative GHG emissions and, to a lesser extent, carbon performance are value relevant. We use handcollected information on quantitative greenhouse gas (GHG) emissions for 433 European companies and build portfolios based on GHG disclosure and performance. We regress portfolios on Carhart (1997) four factor models extended for industry effects over the years 2005 to 2009. Results show that investors achieved abnormal risk-adjusted returns of up to 13.05% annually by exploiting inefficiently priced positive effects of (complete) GHG emissions disclosure and good corporate climate change performance in terms of GHG efficiency. Results imply that, firstly, information costs involved in carbon disclosure and management do not present a burden on corporate financial resources. Secondly, investors should not neglect carbon disclosure and performance when making investment decisions. Thirdly, during the period analysed financial markets were inefficient in pricing publicly available information on carbon disclosure and performance. Mandatory and standardised information on carbon performance would consequently not only increase market efficiency but result in better allocation of capital within the real economy.
Investors React to Disclosure of Carbon Emissions and Environmental Performance
International Journal of Contemporary Accounting
The current industrial development makes economic activities have to utilize natural resources which causes the conversion of forest functions and the use of fossil energy. So with industrial growth, carbon and greenhouse gas emissions tend to increase as well. The purpose of this study was to determine the effect of disclosure of carbon emissions and environmental performance on investor reactions. The population used is manufacturing companies in the food and beverage industry sub-sector as well as the cement sub-sector listed on the Indonesia Stock Exchange in 2018, 2019, and 2020. The number of samples in this study was 48, using purposive sampling method and secondary data, namely annual reports. The analytical method used is multiple linear regression analysis. The results of the study show that the disclosure of carbon emissions has no effect on investor reactions. Meanwhile, environmental performance affects the reaction of investors.
EXPLORING THE LINKS BETWEEN CARBON EMISSIONS PERFORMANCE, SHARE PRICE, AND DISCLOSURE
Increasing pressure on economic actors has produced a degree of standardization and commensuration of carbon emissions reporting and an increasing amount of comparable data is in the public domain. We have recently developed a method for interpreting this data-set to produce a league table of sustainability performance: actors are ranked according to a Performance Score comparing actual performance to the ideal direction of change of the underlying (environmental and economic) parameters, allowing direct and meaningful comparison between actors of quite different natures. The league table is applied to investigate links between emissions performance and both financial performance and the quality of voluntary disclosure of carbon performance data. Using emissions data for FTSE350 companies – publically available via the Carbon Disclosure Project – we analyze correlations between company league table performance and, on the one hand, relative share price movement and, on the other, position in the Carbon Disclosure Leadership Index. We have found no detectable indication of a link between carbon emissions performance (as measured by position in the league table) and either the quality of carbon disclosure or the financial performance of a company. The lack of linkage between carbon performance and either disclosure of share price may be due to a number of reasons: paucity of data/small effect sizes (it may be too early to see the effects); immaturely established causal mechanisms (it may be too early for the effects to manifest); share price and disclosure are not strongly related to emissions performance.
The Relevance to Investors of Greenhouse Gas Emission Disclosures
SSRN Electronic Journal, 2012
This study finds that investors price firms' greenhouse gas (GHG) emissions as a negative component of equity value, and this valuation discount does not differ between firms that voluntarily disclose to the Carbon Disclosure Project (CDP) and non-disclosing firms. We derive the GHG emissions for non-disclosers from an estimation model that incorporates firm characteristics and industry. The finding that investors view CDP amounts and estimates of emissions as equally value-relevant suggests that equity values reflect GHG information from channels other than the CDP. An event study of investors' response to emission-related information in firms' 8-K filings further supports this finding. Economically, our results suggest that, for the median S&P 500 firm, GHG emissions impose a marketimplied equity discount of $79 per ton, representing about one-half of 1 percent of market capitalization.
Organization & Environment, 2017
The purpose of this research is to examine how environmental committees, institutional shareholdings, and board independence affect managerial carbon disclosure decisions, particularly those of firms belonging to highly polluting industries. We focus on Italian firms that operate in a code law environment but that have the option either to adopt the unitary corporate structure prevalent in common law countries or to retain the dual corporate structure used in code law countries. We use weighted and unweighted carbon disclosure indexes based on the Kyoto Protocol requirements. The findings show that all factors greatly affect voluntary carbon disclosure and that their impact is especially strong for firms in highly polluting industries. This study has important implications for managers and regulators.
Firm-Value Effects of Carbon Emissions and Carbon Disclosures
The Accounting Review, 2014
Concern about carbon emissions, and hence concern about disclosure of carbon emission levels, has been expressed by various stakeholders, including corporate executives, boards of directors, investors, creditors, standard setters, government regulators, and NGOs. Indeed, some informed observers expect that the relationship between carbon emissions and global climate change will drive a redistribution of value from firms that do not control their carbon emissions successfully to firms that do (GS Sustain 2009). Using hand-collected carbon emissions data for 2006-2008 that S&P 500 firms disclosed voluntarily to the Carbon Disclosure Project, we examine two separate, yet related questions. The first question addresses firm-and industrylevel characteristics associated with the choice to disclose carbon emissions. Consistent with economic theory, we predict and find a higher likelihood of carbon emission disclosures by firms that are more environmentally proactive. However, our results do not support our prediction, based on socio-political theories, of a higher likelihood of carbon emission disclosures by firms that are more environmentally damaging. Further, we predict and find that firms are more likely to voluntarily disclose their carbon emissions as the proportion of industry peer firm disclosers increases. To address the second question concerning the relationship between carbon emission levels and firm value, we correct for self-selection bias caused by systematic firm-and industrylevel characteristics associated with the decision to disclose such emissions. We predict and find a negative association between carbon emission levels and firm value. On average, for every additional thousand metric tons of carbon emissions for our sample of S&P 500 firms, firm value decreases by $202,000. Results for sensitivity analyses and robustness tests are similar to the main results. JEL Classifications: G14, Q51, M14
Exploring the Links Between Carbon Emissions and Performance, Share Price and Disclosure
2014
Increasing pressure on economic actors has produced a degree of standardization and commensuration of carbon emissions reporting and an increasing amount of comparable data is in the public domain. We have recently developed a method for interpreting this data-set to produce a league table of sustainability performance: actors are ranked according to a Performance Score comparing actual performance to the ideal direction of change of the underlying (environmental and economic) parameters, allowing direct and meaningful comparison between actors of quite different natures. The league table is applied to investigate links between emissions performance and both financial performance and the quality of voluntary disclosure of carbon performance data. Using emissions data for FTSE350 companies – publically available via the Carbon Disclosure Project – we analyze correlations between company league table performance and, on the one hand, relative share price movement and, on the other, po...
Carbon Emission Disclosure and Environmental Performance Effect on Firm Value
IJASS PUBLICATION, 2022
Companies as carbon emitters must show their responsibility towards the environment by reducing carbon emissions. In order to gain legitimacy, companies need to disclose their carbon emission and have good environmental performance. These two aspects are very important because they will impact investors' perceptions and the value of the firm. This paper determines the impact of the disclosure of carbon emissions and environmental performance on firm value. The sample is seven companies on the SRI-KEHATI index from 2016-2020 (5 years). This study used quantitative methods. The secondary data is obtained from published financial reports by the Indonesia Stock Exchange (www.idx.com), sustainability reports, annual reports published through the company's website, and the Ministry of Environment and Forestry's Decree about the PROPER selection from (proper.menlhk.go.id). In order to test the hypothesis, multiple linear regression is used. This study result shows that: carbon emission disclosure has no affect the firm's value. While the environmental performance positively affects the firm value, the carbon emission disclosure and environmental performance positively affects firm's value.
Carbon Exposure and Shareholder Value
Finance & Management Engineering Journal of Africa , 2019
Nowadays, climate change is considered an important issue in many of society's domains. The Stern Review recently concluded that climate change presents a serious global risk and demands urgent global response (Stern, 2007). Corporations have an important stake in this issue. As some businesses are among the biggest emitters of carbon-or greenhouse gases-, companies across all industries are demanded to reduce their emission levels. Carbon pricing by trading or taxation is, or will be initiated to stimulate corporations to reduce their emissions. These measures will initially increase the costs for doing business. The more corporations are required to drive down their carbon emissions the more important a firm's carbon exposure becomes as a management problem. Corporate managers have to align carbon reducing activities with their objective to create shareholder value. This thesis attempts to describe the effects of carbon exposure from a shareholder value perspective. Do investors care for active carbon management? This research aims to examine if corporations who actively manage their carbon exposure and disclose related information to the public, are more appreciated by investors than corporations who do less or do nothing. This research is relevant for today's business studies. By reviewing the position of the investor, this thesis contributes to the public debate on climate change and the role of business. A debate in which many participants have conflicting interests. Politicians, public opinion makers, 'experts', non-governmental organizations, business leaders and so on, all have their own opinions and interests regarding climate change. Overall it seems that most stakeholders in the discussion agree that a response to climate change is needed. However, the way in which responsibility should be taken differs. Fact is that businesses are increasingly demanded to pay for the negative external effects that their operations have on the environment. Depending on the country specific policies, companies have to acquire emissions rights in a trading system or face particular taxations due to their emissions. The internalization of emission costs affects a business's financial performance. Increasing expenses reduce the amount of money which is left for a company's financiers. The investor is the residual claimant of a corporation. This means that after all other financial claimants are paid (e.g. debt holders) and internal investments are completed, investors obtain their share in the company's return; the free cash flow. Investors always decide if they expect to obtain enough return on a certain investment. The investor's expectations of the return on investment of a particular company can be seen as an assessment of all aspects of a certain business and its implications for the future. Including the carbon and environmental strategies of the company. Implicitly, investors hereby decide on the intensity of carbon and/or environmental policies of corporations. From the investors perspective these policies should be in line with shareholder value creation. The investors' interest in the return on investment is a key aspect when evaluating climate change policies for business. Solid understanding of the investor's position is important for understanding the climate change debate.
Carbon Emission Disclosure as Mediation of Factors Affecting Firm Value
2020
Global warming and climate change is now a common topic and a high priority scale issue in the world, especially related to carbon emissions. This study aims to obtain empirical evidence about the factors that influence the implementation of Carbon Emission Disclosure (CED) and whether CED that is voluntary reporting affects the firm value. This quantitative research using secondary data of 72 manufacturing companies listed on the Indonesia Stock Exchange in 2016 – 2018. The results of this study indicate that and profitability have a positive effect on the implementation of CED. The Sobel test results also show that CED can mediate the relationship between and profitability on firm value. The analysis also indicates that CED rating has a positive effect on firm value. This result means that investors consider the implementation of CED in the company is a positive thing and get a good market reaction.