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Carbon Emissions Announcements and Market Returns

Author

Listed:
  • Simone Giansante

    (Department of Economics, Business and Statistics, University of Palermo, Edificio 13, 90138 Palermo, Italy
    School of Management, University of Bath, Bath BA2 7AY, UK)

  • Mahmoud Fatouh

    (Bank of England, London EC2R 8AH, UK
    Economics Department, University of Essex, Colchester CO4 3SQ, UK)

  • Nicholas Dove

    (School of Management, University of Bath, Bath BA2 7AY, UK
    Ernst & Young, London SE1 2AF, UK)

Abstract

The paper investigates the impact of carbon emissions on stock price returns of European listed firms. This relationship is assessed across all three emissions scopes, as well as using expectations to detect if future emissions impact contemporary returns. Our findings show that firms with higher expected future emissions deliver lower contemporary returns after controlling for market capitalization, profit and other known return predictors. This result is statistically significant in the post Paris Agreement period for two- to three-year expectations of Scope 2 emissions. However, there is marginal to no significant negative relationship between current emissions and current returns. Overall, the results suggest that more environment-minded investors look further ahead and would expect lower returns from a polluting firm compared to a firm with no carbon emissions after the Paris Agreement.

Suggested Citation

  • Simone Giansante & Mahmoud Fatouh & Nicholas Dove, 2023. "Carbon Emissions Announcements and Market Returns," Sustainability, MDPI, vol. 15(13), pages 1-16, June.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:13:p:10385-:d:1184453
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    References listed on IDEAS

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    Cited by:

    1. Desheng Liu & Yizhen Wang & Mingsheng Li, 2024. "Is it just for shareholders or for all stakeholders? Evidence based on carbon emissions and cash dividends from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 4069-4094, December.
    2. Jovelyn Ferrer & Juliana Malagon & Enrique ter Horst, 2023. "Does Climate Change News Matter?," Sustainability, MDPI, vol. 15(18), pages 1-16, September.

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