Hey CEOs, does the enduring Great Recession have your company’s stock price down? Perhaps you should consider telling the world about your carbon footprint.
According to a new study from business school faculty at UC Davis and UC Berkeley, companies that voluntarily release carbon emissions information are likely to see an immediate boost in the value of their stock.
The researchers looked at 10 years’ worth of news releases from Corporate Social Responsibility, a news wire that regularly publishes disclosures about companies’ carbon emissions. They ended up with a sample of 172 greenhouse gas disclosures for 84 companies in industries ranging from tech to financial services. They then looked at the stock price for each of those companies before the disclosure and in the following days.
The result? Companies that released greenhouse gas emissions information saw their stock price jump by roughly half a percentage point, compared to a control group. For smaller companies, the effect was even bigger: 2.3%.
As Paul Griffin, the lead author of the study, told The Daily Climate, “When a company makes a voluntary disclosure of this kind, it signals to the investment community that this is a firm that is environmentally responsible.” It also may signal that it’s a firm that’s preparing for a future with more stringent carbon regulations.
These results are in keeping with what’s known among management wonks as “voluntary disclosure theory,” which predicts that making internal corporate information public, within some limits, tends to produce net benefits for shareholders.
The decision might not be voluntary for long, though. Companies aren’t currently required to disclose their greenhouse gas emissions, but they could be soon. Perhaps the people at Honeywell, one of whom once said there’s “no need for the public to have information beyond what is entering the atmosphere,” should reconsider, if only for their own good.