Liesen et al (2016)

Liesen, Andrea, Frank Figge, Andreas Hoepner, and Dennis Patten. “Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately?” Journal of Business Finance and Accounting, August 2016.

From the authors’ abstract: “This paper empirically assesses the relevance of information on corporate climate change disclosure and performance to asset prices, and discusses whether this information is priced appropriately… We use hand‐collected information on quantitative GHG emissions for 433 European companies and build portfolios based on GHG disclosure and performance. We regress portfolios on a standard four factor model 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.”

Link: https://onlinelibrary.wiley.com/doi/10.1111/jbfa.12217