The stock market effects of committing and setting GHG targets: evidence from the science-based targets initiative

Santiago Guerrero-Escobar, Gerardo Hernández-del-Valle and Marco Hernández-Vega

Global Finance Journal, 2025, vol. 67, issue C

Abstract: Many companies are adopting ambitious greenhouse gas (GHG) emission-reduction targets that align with the Paris Agreement, regarding broader climate strategies. Despite this trend, empirical evidence on the implications to the financial market remains limited. This paper examines how committing to and setting GHG targets affect stock returns and volatility, using a daily panel of publicly listed companies from January 2015 to October 2024. We employ an event study framework, supplemented by a generalized autoregressive conditional heteroskedasticity model with a novel trend component. Our findings show that neither committing to nor setting a GHG target has a statistically significant impact on stock returns. However, both actions are associated with reductions in stock price volatility in a few countries, like Australia, Japan, South Africa, Taiwan, and New Zealand. This suggests that market responses to climate commitments can vary across regional and policy contexts.

Keywords: Stock return; Volatility; Greenhouse gas emissions; GHG; Environmental, social, and governance; ESG, generalized autoregressive conditional heteroskedasticity; GARCH (search for similar items in EconPapers)
JEL-codes: C1 E1 I0 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000924

DOI: 10.1016/j.gfj.2025.101165

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