by Ann Withanee — January 28, 2011—How much greenhouse gas a company produces has a significant effect on the value of the company’s stock, according to a new study by researchers at the University of California, Davis; University of California, Berkeley; and University of Otago in New Zealand.
The greater the carbon emissions, the lower a company’s stock, all other factors being equal, the researchers found. The study was led by Paul Griffin, a professor in the UC Davis Graduate School of Management.
Griffin and his colleagues also discovered that markets respond almost immediately when a company reports an event that could affect global climate change, with stock values responding the same day as the disclosure.
The findings bolster the arguments of investor groups, environmental advocates and watchdog organizations that have been seeking greater disclosure of company actions that affect climate change.
Griffin and colleagues David H. Lont of the University of Otago in New Zealand and Yuan Sun of the University of California, Berkeley, analyzed four years of data (2006-09) on firms listed in the Standard & Poor’s 500 and five years of data (2005-09) for the top 200 publicly traded firms in Canada.
The researchers developed mathematical models to analyze the data. They found the link between stock values and greenhouse gas emissions to hold true in most industries, although the correlation was strongest for energy companies and utilities.
The researchers then tracked movements of stocks on days around when these events were reported. “We see a response on exactly the day you would expect to see it, and that is when the information becomes public,” Griffin says.
For more information on the University of California Davis Graduate School of Management, visit the Web site.
