Published on February 7th, 2012 | by Silvio Marcacci0
Playing the Market: Disclosing Emissions Data Boosts Stock Prices
A new study finds that companies that voluntarily reported data about their greenhouse gas emissions saw stock prices increase in value $10 billion dollars over a 10-year period. In the two days immediately after announcements, stock prices jumped nearly half a percent, compared to the two days before announcements. Comparatively, companies that did not voluntarily release emissions information saw no statistical change in their stock values over that period.
Smaller companies saw an even larger increase in stock value, 2.3 percent, compared to larger companies and the overall mean. The report attributed this advantage to analysts and investors tracking the smaller companies less closely than larger companies, making their disclosures more valuable to the stock market.
The study “Going Green: Market Reaction to CSR Newswire Releases,” was conducted by University of California researchers and compared 172 press releases about emissions data by 84 American companies from 2000 to 2010.
The report could lend new credibility to the efforts of so-called “activist shareholders” who push companies to reduce their environmental footprint and disclose emissions data. Last year, a record 111 shareholder resolutions were filed with 81 U.S. and Canadian companies on climate change, fossil fuel production, and sustainability risks.
“When a company makes a voluntary disclosure of this kind, it signals to the investment community that this is a firm that is environmentally responsible,” said Paul Griffin, report co-author and UC Berkeley professor. “Investors are saying they would prefer to invest in an environmentally responsible firm.”
Once companies decide to benchmark their environmental impact, they often set aspirational goals to reduce their footprint. That decision may then have a ripple effect on their supply chain. Another recent report showed the number of multinational companies that planned to end vendor relationships within five years for suppliers missing sustainability goals hit 39 percent in 2011.
U.S. companies are currently not required by the Securities and Exchange Commission (SEC) to report greenhouse gas emissions, but companies are required to disclose information material to stock value. This UC report echoes a 2011 study of companies on Standard and Poor’s 500 Index that showed high levels of greenhouse gas emissions could depress a firm’s value. If this trend of emissions being tied to stock value holds up, companies could soon be forced to report their emissions.
“Companies should not be as reluctant as they have been to provide this information because we show that it can be shareholder-positive,” said Griffin. “Our message is that it pays to be green.”
Source: The Daily Climate