IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11507.html
   My bibliography  Save this paper

Corporate Green Pledges

Author

Listed:
  • Michael Bauer
  • Daniel Huber
  • Eric Offner
  • Marlene Renkel
  • Ole Wilms
  • Michael D. Bauer

Abstract

We identify corporate commitments for reductions of greenhouse gas emissions—green pledges—from news articles using a large language model. About 8% of U.S. firms have made green pledges, and these companies tend to be larger and browner than those without pledges. Announcements of green pledges significantly and persistently raise stock prices, consistent with reductions in the carbon premium. Firms that make green pledges subsequently reduce their CO2 emissions. Our evidence suggests that green pledges are credible, have material new information for investors, and can reduce perceived transition risk.

Suggested Citation

  • Michael Bauer & Daniel Huber & Eric Offner & Marlene Renkel & Ole Wilms & Michael D. Bauer, 2024. "Corporate Green Pledges," CESifo Working Paper Series 11507, CESifo.
    • Handle: RePEc:ces:ceswps:_11507
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11507.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Taylor, Alan M. & Dube, Arindrajit & Girardi, Daniele & Jordà , Òscar, 2023. "A Local Projections Approach to Difference-in-Differences Event Studies," CEPR Discussion Papers 18141, C.E.P.R. Discussion Papers.
    2. Ruhollah Eskandari & Morteza Zamanian, 2023. "Heterogeneous responses to corporate marginal tax rates: Evidence from small and large firms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1018-1047, November.
    3. Luca Barbaglia & Sergio Consoli & Sebastiano Manzan, 2023. "Forecasting with Economic News," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 41(3), pages 708-719, July.
    4. Elliott Ash & Stephen Hansen, 2023. "Text Algorithms in Economics," Annual Review of Economics, Annual Reviews, vol. 15(1), pages 659-688, September.
    5. Philipp Krueger & Zacharias Sautner & Laura T Starks, 2020. "The Importance of Climate Risks for Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1067-1111.
    6. Anton Korinek, 2023. "Generative AI for Economic Research: Use Cases and Implications for Economists," Journal of Economic Literature, American Economic Association, vol. 61(4), pages 1281-1317, December.
    7. Alejandro Lopez-Lira & Yuehua Tang, 2023. "Can ChatGPT Forecast Stock Price Movements? Return Predictability and Large Language Models," Papers 2304.07619, arXiv.org, revised Sep 2024.
    8. Bingler, Julia Anna & Kraus, Mathias & Leippold, Markus & Webersinke, Nicolas, 2022. "Cheap talk and cherry-picking: What ClimateBert has to say on corporate climate risk disclosures," Finance Research Letters, Elsevier, vol. 47(PB).
    9. Audrino, Francesco & Offner, Eric A., 2024. "The impact of macroeconomic news sentiment on interest rates," International Review of Financial Analysis, Elsevier, vol. 94(C).
    10. Ball, R & Brown, P, 1968. "Empirical Evaluation Of Accounting Income Numbers," Journal of Accounting Research, Wiley Blackwell, vol. 6(2), pages 159-178.
    11. Cepoi, Cosmin-Octavian, 2020. "Asymmetric dependence between stock market returns and news during COVID-19 financial turmoil," Finance Research Letters, Elsevier, vol. 36(C).
    12. Qing Li & Hongyu Shan & Yuehua Tang & Vincent Yao, 2024. "Corporate Climate Risk: Measurements and Responses," The Review of Financial Studies, Society for Financial Studies, vol. 37(6), pages 1778-1830.
    13. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    14. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    15. Baker, Andrew C. & Larcker, David F. & Wang, Charles C.Y., 2022. "How much should we trust staggered difference-in-differences estimates?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 370-395.
    16. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    17. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
    18. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    19. Bauer, Michael & Huber, Daniel & Rudebusch, Glenn & Wilms, Ole, 2022. "Where is the carbon premium? Global performance of green and brown stocks," Other publications TiSEM 6b117156-316d-440a-9fa5-b, Tilburg University, School of Economics and Management.
    20. Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 354, European Central Bank.
    21. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March.
    22. Roth, Jonathan & Sant’Anna, Pedro H.C. & Bilinski, Alyssa & Poe, John, 2023. "What’s trending in difference-in-differences? A synthesis of the recent econometrics literature," Journal of Econometrics, Elsevier, vol. 235(2), pages 2218-2244.
    23. Faccini, Renato & Matin, Rastin & Skiadopoulos, George, 2023. "Dissecting climate risks: Are they reflected in stock prices?," Journal of Banking & Finance, Elsevier, vol. 155(C).
    24. Fama, Eugene F & French, Kenneth R, 1995. "Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-155, March.
    Full references (including those not matched with items on IDEAS)

    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. Alex Hollingsworth & Krzysztof Karbownik & Melissa A. Thomasson & Anthony Wray, 2024. "The Gift of a Lifetime: The Hospital, Modern Medicine, and Mortality," American Economic Review, American Economic Association, vol. 114(7), pages 2201-2238, July.
    2. Mark Kattenberg & Bas Scheer & Jurre Thiel, 2023. "Causal forests with fixed effects for treatment effect heterogeneity in difference-in-differences," CPB Discussion Paper 452, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    4. Hjalmarsson, Linn & Kaiser, Boris & Bischof, Tamara, 2023. "The impact of physician exits in primary care: A study of practice handovers," Health Policy, Elsevier, vol. 135(C).
    5. Martin, Diego A. & Romero, Dario A., 2024. "Social distancing and COVID-19 under violence: Evidence from Colombia," Journal of Development Economics, Elsevier, vol. 170(C).
    6. Cardinali, Rebecca & Lusher, Lester & Taylor, Rebecca & Villas-Boas, Sofia Berto, 2022. "Stigma Goods, Self-Checkout Adoption, and Changes in Purchasing Decisions," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322427, Agricultural and Applied Economics Association.
    7. Huang, Chenchen & Luo, Di & Mukherjee, Soumyatanu & Mishra, Tapas, 2022. "To Acquire or to Ally? Managing Partners’ Environmental Risk in International Expansion," MPRA Paper 121808, University Library of Munich, Germany, revised 07 Jan 2023.
    8. Chen, Jidong & Shi, Xinzheng & Zhang, Ming-ang & Zhang, Sihan, 2024. "Centralization of environmental administration and air pollution: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).
    9. Gaygysyz Ashyrov & Denis Ivanov, 2024. "Mega‐events and human rights violations: Empirical evidence from the long‐term perspective," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(2), pages 175-196, May.
    10. Mikhail Mamonov & Anna Pestova & Steven Ongena, 2023. "“Crime and Punishment”? How Banks Anticipate and Propagate Global Financial Sanctions," CERGE-EI Working Papers wp753, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    11. Li, Daiyue & Jin, Yanhong & Cheng, Mingwang, 2024. "Unleashing the power of industrial robotics on firm productivity: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 500-520.
    12. Fernando Rubio, 2005. "Estrategias Cuantitativas De Valor Y Retornos Por Accion De Largo," Finance 0503029, University Library of Munich, Germany.
    13. Bianconi, Marcelo & Esposito, Federico & Sammon, Marco, 2021. "Trade policy uncertainty and stock returns," Journal of International Money and Finance, Elsevier, vol. 119(C).
    14. repec:fip:fedrwp:98029 is not listed on IDEAS
    15. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    16. Compagnoni, Marco & Grazzi, Marco & Pieri, Fabio & Tomasi, Chiara, 2023. "Extended producer responsibility and trade flows in waste: The case of batteries," FEEM Working Papers 338789, Fondazione Eni Enrico Mattei (FEEM).
    17. Davidson, Carl & Heyman, Fredrik & Matusz, Steven & Sjöholm, Fredrik & Chun Zhu, Susan, 2022. "How International Experience Helps Shape Labor Market Outcomes," Working Paper Series 1453, Research Institute of Industrial Economics, revised 09 Jun 2024.
    18. Melnik, Walter & Smyth, Andrew, 2024. "R&D tax credits and innovation," Journal of Public Economics, Elsevier, vol. 236(C).
    19. Qianwei Ying & Tahir Yousaf & Qurat ul Ain & Yasmeen Akhtar & Muhammad Shahid Rasheed, 2019. "Stock Investment and Excess Returns: A Critical Review in the Light of the Efficient Market Hypothesis," JRFM, MDPI, vol. 12(2), pages 1-22, June.
    20. Dami'an Vergara, 2022. "Minimum Wages and Optimal Redistribution," Papers 2202.00839, arXiv.org, revised Dec 2022.
    21. Yashraj Varma & Renuka Venkataramani & Parthajit Kayal & Moinak Maiti, 2021. "Short-Term Impact of COVID-19 on Indian Stock Market," JRFM, MDPI, vol. 14(11), pages 1-15, November.

    More about this item

    Keywords

    climate finance; decarbonization commitments; text classification; event study; transition risk; carbon premium;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:ces:ceswps:_11507. 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: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    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.