Carbon Disclosure Raises Stock Prices, Study Finds

Companies that voluntarily issue press releases disclosing their carbon emission information see their stock prices rise significantly in the following days, according to a University of California study.

Going Green: Market Reaction to CSR Newswire Releases, by Paul Griffin of UC Davis and Yuan Sun of UC Berkeley, used archives of the Corporate Social Responsibility Newswire to identify climate change-related press releases issued between 2000 and 2010. The researchers tracked the stock changes of the companies from two days before a press release was issued to two days after. They examined a broad range of industries, including information technology, health care, telecommunications, and financial services, as well as energy and utilities.

For the 172 companies identified as making voluntary disclosures, average stock prices increased just under a half percent in the five-day span around the disclosures, according to the study.

To test their findings, the researchers compared stock movements of these companies to those of similar firms that did not disclose carbon emission information during the same time periods. The companies that did not disclose climate change information did not see a statistically significant increase in values, and their prices actually tended to fall, Griffin said.

The researchers also analyzed the stock changes for smaller firms that disclosed carbon emission information. These firms saw an even greater effect on their stock values, with prices increasing 2.32 percent.

Griffin and Sun argue that small firms are not followed as closely by analysts, and investors know less about them, so the release of climate change information would have a more pronounced effect.

The study looked at voluntary disclosures only, so the authors said they could not determine if mandatory disclosures by all such companies would have yielded similar increases.

In an Environmental Leader column, Ron Robins, founder and analyst of Investing for the Soul, offers a variety of perspectives on whether sustainability improves profits.

Picture credit: Mike Lee