CO2-Emissionen und Finanzperformance: Existiert ein Zusammenhang? Timo Busch Climate Service Center / KfW, 17./18. Januar 2013

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Source: Busch, T., & Shrivastava, P. (2011). The Global Carbon Crisis - Emerging Carbon Constraints and Strategic Management Options. Sheffield, UK: Greenleaf Publishing. Pictures: http://www.karmakonsum.de; http://altrapoint.com

As much as money rules the world…

…drives carbon the world’s economy.

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Overall financial consequences of disaster for BP: $38 bn costs

Market capitalization of BP cut in half within seven weeks: $95 bn losses

Sources: http://www.guardian.co.uk/business/2012/jul/31/deepwater-horizon-bp-847m-dollars; http://www.businessinsider.com/bp-market-cap-2010-6

Study I

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* Tobin’s q measured as equity value, book value of long-term debt, and net current liabilities by total assets

Source: Busch, T., & Hoffmann, V. (2011). How hot is your bottom-line? Linking carbon and financial performance: Business & Society 50(2), 233 - 265.

Data SAM / DJSI COMPUSTAT

Sample 174 companies globally Years 2006 (1 year lag for DV) IV GHGs scope 1-2 in tons / sales DV Tobin’s q* Method OLS regressions with

heteroskedasticity-consistent standard error estimators

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=> Firms with lower carbon intensity have higher Tobin’s q

Study II

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* Abnormal return of long-short portfolios. These portfolios are based on a trading strategy which consists of buying stocks of firms with climate impact and reduction statements and selling stocks of corporations without such statements.

Source: Ziegler, A., Busch, T., & Hoffmann, V. H. (2011). Disclosed corporate responses to climate change and stock performance: An international empirical analysis. Energy Economics, 33(6), 1283-1294.

Data ASSET4 (now Thomson Reuters) Thomson Financial Datastream

Sample 1014 companies globally Years 2001 – 2006 IV Statements about climate impact

and GHG reductions DV Alpha* Method Portfolio analysis based on Carhart

four-factor model

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=> Timeframe 2004-2006 in EU: long-short portfolio strategy reflecting on firms’ GHG reductions generates alpha

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Study III

* Market-based risk measured as volatility of a firm’s stock price (total risk) and unsystematic risk (total risk minus beta)

Source: Busch, T., Lehmann, N., & Hoffmann, V. H. (2012). Corporate Social Responsibility, Negative Externalities, and Financial Risk: The Case of Climate Change. Duisenberg school of finance - Tinbergen Institute Discussion Paper, TI 12-102/IV/DSF40.

Data Trucost Bloomberg

Sample 1699 companies globally Years 2002 – 2008 (1 year lag for DV) IV GHGs scope 1 in tons / sales

compared to industry benchmark DV Market-based risk* Method Panel analysis with fixed effects

model

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=> Firms with below industry GHG emissions have a lower market-based risk

Conclusion

  Indication that high emission levels are negatively associated with market evaluations

  Financial markets: seem to consider climate change as a business relevant factor

  Strategic management: proactively reducing a firm’s carbon dependency is important

  Next steps:   increase transparency about GHG emissions to foster these

developments   broaden awareness of climate-finance link to accelerate carbon

sensitivity of capital markets

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Source: Meier, F. (2011): Wachstum für die Natur. WWF Schweiz

After industrialization follows decarbonization