An Empirical Approach to Integrating Climate Reputational Risk in Long-Term Scenario Analysis

Gianni Guastella, Stefano Pareglio and Caterina Schiavoni ()
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Caterina Schiavoni: Deloitte Climate and Sustainability, 20144 Milan, Italy

Sustainability, 2023, vol. 15, issue 7, 1-17

Abstract: We propose an empirical approach to estimate the impact of climate transition risk on corporate revenues that specifically accounts for reputational risk. We employ the information on disclosed Scope 3 emissions to proxy companies’ carbon footprint along the value chain. A threshold regression is employed to identify the emission level above which reputational risk impacts revenues, and we link this impact to a climate policy stringency indicator. We estimate the threshold regression on a sample of companies within the European Union (EU), and find the threshold at around the 70th percentile of the Scope 3 emissions distribution. We find that companies with Scope 3 emissions beyond the threshold experienced substantially lower revenue growth as climate policies have become more stringent, compared to other companies.

Keywords: climate reputational risk; scenario analysis; Scope 3 emissions (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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