Science-based emission targets and risk-adjusted portfolio return: An analysis using global SBTi-validated stocks
Petter Dahlström (petter.dahlstrom@indek.kth.se),
Hans Lööf (hans.loof@indek.kth.se),
Maziar Sahamkhadam,
Andreas Stephan and
Emma Rui Lu (emmarl@kth.se)
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Petter Dahlström: Royal Institute of Technology
Emma Rui Lu: Royal Institute of Technology
No 492, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies
Abstract:
This paper investigates the financial importance of voluntarily disclosing climate commitments and independent expert-validated action plans. We construct portfolios of 1,518 global stocks of firms that have set science-based (SBTi) emission targets in line with the goals of the Paris Agreement. Coarsened exact matching is used to create benchmark portfolios of otherwise similar global stocks but without expert-validated emission targets. Using the five-factor Fama-French model, the results show positive and statistically significant larger risk-adjusted excess returns for the SBTi portfolios in the post-SBTi validation period. This finding is more pronounced for stocks from high CO2 emission industries as well as for stocks of firms with CO2 emissions above the industry average. Overall, the results support the view that investors should prefer a portfolio of SBTi-validated stocks also since it carries lower climate-related risks.
Keywords: Risk adjusted return; carbon emission; emission disclosure; Fama French; SBTi (search for similar items in EconPapers)
JEL-codes: D62 G11 G23 G30 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2023-03-27
New Economics Papers: this item is included in nep-des, nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0492
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