Proof that Disclosing Carbon Emissions Increases Stock Prices

A new study by the University of California provides evidence that companies that publicly announce information about their carbon emissions will see a significant and almost immediate increase in share price. The study, conducted by Paul Griffin of UC Davis and Yuan Sun of UC Berkeley, involved an analysis of ten years of news releases from Corporate Social Responsibility Newswire, which regularly publishes press releases disclosing companies' greenhouse gas emissions. The researchers narrowed down their initial sample of press announcements to 172 voluntary releases of carbon footprint data from 84 companies in a wide range of industries including healthcare, technology and financial services. For each announcement, they tracked the historic stock price for the company for a five day period starting two days before the greenhouse gas data was published and ending two days after. These prices were then compared to a control group of similar companies that did not release carbon information during the same timeframe. The results show that on average, a company's stock price increased by roughly half a percent following their greenhouse gas emissions announcements. The change was even more significant for smaller companies at 2.32 percent. For the companies that did not disclose carbon information, no statistically significant change in stock price was detected. In fact, those stock prices were more likely to fall. These findings indicate that investors are increasingly considering companies' environmental performance in their investment decisions. Paul Griffin, UC Davis School of Management Professor and a co-author of the study, told The Daily Climate, "This is evidence that managers' voluntary climate change disclosures generate positive returns for shareholders." The results of the study could also give weight to investor groups and environmental advocates that are using ownership as a way to influence the social and environmental practices of companies and increase their transparency. Last year saw a significant increase in the number of shareholder resolutions being filed to advocate for change on issues like the environment, corporate political spending, and human rights. Although the Securities and Exchange Commission does not require companies to report greenhouse gas emissions, last year the EPA started requiring companies that emit more than 25,000 metric tons of CO2 equivalent annually to do so. The SEC requirements could also change if the findings of this new study are upheld, because firms must disclose any information relevant to their stock values. *** Kara Scharwath is a corporate social responsibility professional, marketing consultant and Sustainable Management MBA Candidate. She is currently working as a Graduate Associate in Corporate Citizenship at the Walt Disney Company while pursuing her degree at Presidio Graduate School. Follow her on Twitter @karameredith.