Do emission reductions pay off? An empirical investigation into the reliability of carbon emission data and the carbon performance – financial performance linkThomas Pioch

11. Oktober 2018

Climate change is one of the key challenges of the 21st century since a number of problems directly result from it or are accelerated by it, and the main driver behind it is anthropogenic carbon dioxide emissions. With governmental efforts to curb climate change slowing down, corporations may profit from picking up the torch and proactively engage in keeping climate change within the 2°C range.

If investors, as a key stakeholder group, take into account carbon emissions in their decision-making processes, companies showing progress in that regard may benefit. However, carbon emission data is to a substantial degree too unreliable and incomplete to provide meaningful information. This thesis compares the six main providers of carbon emission data with respect to completeness and consistency and develops a range of criteria that help identify the reliable data within the databases. Based on the natural-resource-based view, the hypothesis, that “improvements in carbon emissions will positively affect financial performance,” is developed and then tested. Using only those carbon emission data that are characterized as particularly reliable, and thus carry the most meaning for investors, the thesis finds strong evidence that firms will profit from efforts towards emission reduction.