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

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

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.

Suggested Citation

  • Guerrero-Escobar, Santiago & Hernández-del-Valle, Gerardo & Hernández-Vega, Marco, 2025. "The stock market effects of committing and setting GHG targets: evidence from the science-based targets initiative," Global Finance Journal, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000924
    DOI: 10.1016/j.gfj.2025.101165
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • I0 - Health, Education, and Welfare - - General

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