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Mining for “Green Diamonds” — Value Relevance of Greenhouse Gas Emissions

In: Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes

Author

Listed:
  • Carsten Homburg
  • Laurens O. J. Lapp
  • Roman Schick

Abstract

Using an international dataset of 5,861 firm-year observations between 2009 and 2016 obtained from the Carbon Disclosure Project (CDP), we analyze the effect of firms’ Greenhouse Gas (GHG) emissions on stock price performance. To this end, we first discuss former research which finds an equity discount entailed by high levels of GHG emissions. We then focus on additional metrics of stock price performance, namely stock price return and stock price risk. Interestingly, we do not find any significant impact of GHG emissions on these metrics. A possible explanation is that investors are not yet able to quantify the GHG emission risk due to insufficient disclosure.

Suggested Citation

  • Carsten Homburg & Laurens O. J. Lapp & Roman Schick, 2024. "Mining for “Green Diamonds” — Value Relevance of Greenhouse Gas Emissions," World Scientific Book Chapters, in: Cheng Few Lee & Alice C Lee & John C Lee (ed.), Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes, chapter 55, pages 1755-1794, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811269943_0055
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    Keywords

    Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G3 - Financial Economics - - Corporate Finance and Governance

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