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An Empirical Approach to Integrating Climate Reputational Risk in Long-Term Scenario Analysis

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  • Gianni Guastella

    (Department of Mathematics and Physics “Niccolò Tartaglia”, Università Cattolica del Sacro Cuore, 25121 Brescia, Italy
    Deloitte Climate and Sustainability, 20144 Milan, Italy)

  • Stefano Pareglio

    (Department of Mathematics and Physics “Niccolò Tartaglia”, Università Cattolica del Sacro Cuore, 25121 Brescia, Italy
    Deloitte Climate and Sustainability, 20144 Milan, Italy)

  • Caterina Schiavoni

    (Deloitte Climate and Sustainability, 20144 Milan, Italy)

Abstract

We propose an empirical approach to estimate the impact of climate transition risk on corporate revenues that specifically accounts for reputational risk. We employ the information on disclosed Scope 3 emissions to proxy companies’ carbon footprint along the value chain. A threshold regression is employed to identify the emission level above which reputational risk impacts revenues, and we link this impact to a climate policy stringency indicator. We estimate the threshold regression on a sample of companies within the European Union (EU), and find the threshold at around the 70th percentile of the Scope 3 emissions distribution. We find that companies with Scope 3 emissions beyond the threshold experienced substantially lower revenue growth as climate policies have become more stringent, compared to other companies.

Suggested Citation

  • Gianni Guastella & Stefano Pareglio & Caterina Schiavoni, 2023. "An Empirical Approach to Integrating Climate Reputational Risk in Long-Term Scenario Analysis," Sustainability, MDPI, vol. 15(7), pages 1-17, March.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:7:p:5886-:d:1109792
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    References listed on IDEAS

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