IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i24p13613-d698664.html
   My bibliography  Save this article

Overallocation and Correction of Carbon Emissions in the Evaluation of Carbon Footprint

Author

Listed:
  • Alex Gurvich

    (PFM Asset Management, Philadelphia, PA 19103, USA)

  • Germán G. Creamer

    (School of Business, Stevens Institute of Technology, Hoboken, NJ 07030, USA)

Abstract

This paper points to several carbon footprint data distortions that overallocate carbon footprints to individual companies, and to several carbon data intricacies that lead to improved data integrity. Data distortion due to the same company being listed in multiple geographical jurisdictions or through different share classes overstates Emissions Scope 1 by 4.6%, Emissions Scope 2 by 5.5%, Emissions Scope 3 by 10.6% and Reserves by 6.0%. Data distortion due to index construction by having different market capitalization in representative indices overallocates Emissions Scope 1 by 33.9%, Emissions Scope 2 by 27.6%, Emissions Scope 3 by 21.3% and Reserves by 57.2%. A significant amount of carbon data is not precise but is estimated by third-party providers through proprietary techniques. The estimated data for Scope 1 Emissions is 46.4% for the companies in the index. In addition, carbon data is stale, resulting in 94.5% of data being two years old or more. Usage of carbon data in a present format may incorrectly remove some companies from portfolios (negative screen, complete removal) or incorrectly reduce some companies’ weight in a portfolio (partial screen, fractional removal).

Suggested Citation

  • Alex Gurvich & Germán G. Creamer, 2021. "Overallocation and Correction of Carbon Emissions in the Evaluation of Carbon Footprint," Sustainability, MDPI, vol. 13(24), pages 1-14, December.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:24:p:13613-:d:698664
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/24/13613/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/24/13613/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shameek Konar & Mark A. Cohen, 2001. "Does The Market Value Environmental Performance?," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 281-289, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zixun Guo & Zhimei Gao & Wenbin Zhang, 2023. "Accounting and Decomposition of Energy Footprint: Evidence from 28 Sectors in China," Sustainability, MDPI, vol. 15(17), pages 1-24, September.
    2. Wei-Kang Lin & Xiao-Wu Tang & Yuan Zou & Jia-Xin Liang & Ke-Yi Li, 2023. "Research on the Bearing Capacity and Sustainable Construction of a Vacuum Drainage Pipe Pile," Sustainability, MDPI, vol. 15(9), pages 1-15, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tal Shahor, 2018. "Is the Marginal Effect of Education on Income Diminishing?," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 4, May - Aug.
    2. Vitaliy Roud & Thomas Wolfgang Thurner, 2018. "The Influence of State‐Ownership on Eco‐Innovations in Russian Manufacturing Firms," Journal of Industrial Ecology, Yale University, vol. 22(5), pages 1213-1227, October.
    3. Zhengxia He & Shichun Xu & Wenxing Shen & Meiling Wang & Cunfang Li, 2019. "Exploring external and internal pressures on the environmental behavior of paper enterprises in China: A qualitative study," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 951-969, September.
    4. Rayenda Khresna Brahmana & Maria Kontesa, 2021. "Does clean technology weaken the environmental impact on the financial performance? Insight from global oil and gas companies," Business Strategy and the Environment, Wiley Blackwell, vol. 30(7), pages 3411-3423, November.
    5. Homroy, Swarnodeep, 2023. "GHG emissions and firm performance: The role of CEO gender socialization," Journal of Banking & Finance, Elsevier, vol. 148(C).
    6. Eng, Li Li & Fikru, Mahelet G. & Vichitsarawong, Thanyaluk, 2021. "The impact of toxic chemical releases and their management on financial performance," Advances in accounting, Elsevier, vol. 53(C).
    7. Petra Andries & Ute Stephan, 2019. "Environmental Innovation and Firm Performance: How Firm Size and Motives Matter," Sustainability, MDPI, vol. 11(13), pages 1-17, June.
    8. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    9. Bai Xue & Zhuang Zhang & Pingli Li, 2020. "Corporate environmental performance, environmental management and firm risk," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1074-1096, March.
    10. David Bendig & Andreas Wagner & Kevin Lau, 2023. "Does it pay to be science‐based green? The impact of science‐based emission‐reduction targets on corporate financial performance," Journal of Industrial Ecology, Yale University, vol. 27(1), pages 125-140, February.
    11. Stephen Bahadar & Muhammad Nadeem & Rashid Zaman, 2023. "Toxic chemical releases and idiosyncratic return volatility: A prospect theory perspective," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2109-2143, June.
    12. Ma-Ju Wang, 2014. "A Study on the Differences in Adopting Cash Refund Capital Reduction and Stock Repurchase By Companies in Bull and Bear Stock Markets," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(9), pages 1237-1253, September.
    13. Juan Murguia & Sergio Lence, 2015. "Investors’ Reaction to Environmental Performance: A Global Perspective of the Newsweek ’s “Green Rankings”," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(4), pages 583-605, April.
    14. Vanita Tripathi & Amanpreet Kaur, 2022. "Does Socially Responsible Investing Pay in Developing Countries? A Comparative Study Across Select Developed and Developing Markets," FIIB Business Review, , vol. 11(2), pages 189-205, June.
    15. Suhong Li & Thomas Ngniatedema & Fang Chen, 2017. "Understanding the Impact of Green Initiatives and Green Performance on Financial Performance in the US," Business Strategy and the Environment, Wiley Blackwell, vol. 26(6), pages 776-790, September.
    16. Iulie Aslaksen & Terje Synnestvedt, 2003. "Ethical investment and the incentives for corporate environmental protection and social responsibility," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 10(4), pages 212-223, December.
    17. Lyon, Thomas & Lu, Yao & Shi, Xinzheng & Yin, Qie, 2013. "How do investors respond to Green Company Awards in China?," Ecological Economics, Elsevier, vol. 94(C), pages 1-8.
    18. Hakkon Kim & Kwangwoo Park & Doojin Ryu, 2017. "Corporate Environmental Responsibility: A Legal Origins Perspective," Journal of Business Ethics, Springer, vol. 140(3), pages 381-402, February.
    19. Timo Busch & Nils Lehmann & Volker H. Hoffmann, 2012. "Corporate Social Responsibility, Negative Externalities, and Financial Risk: The Case of Climate Change," Tinbergen Institute Discussion Papers 12-102/IV/DSF40, Tinbergen Institute.
    20. Maogang Tang & Silu Cheng & Wenqing Guo & Weibiao Ma & Fengxia Hu, 2023. "Relationship between carbon emission trading schemes and companies’ total factor productivity: evidence from listed companies in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 11735-11767, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:24:p:13613-:d:698664. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.