Impact of greenhouse gas emissions disclosure policy on stock returns of Euronext listed companies

Details

Supervisors

Grégoire, Philippe

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

Context - The current lack of standardised reporting framework is a real obstacle for the materiality assessment of ESG data and particularly greenhouse gas (GHG) emissions. Hence, investors must find their way around to make investment decisions. Purpose - The aim of this study is to understand the companies’ incentives to disclose their GHG emissions knowing that such disclosure makes them vulnerable to market reactions. Methodology - The difference between the baseline valuation computed from a non-disclosing sample and the integrated disclosure policy valuation computed from a disclosing group has been analysed in order to depict the materiality of the GHG emissions disclosure. The performance of both samples has been measured using the alpha computed through the Capital Asset Pricing Model, the Fama-French three-factor model and the Carhart four-factor model. Findings - Our results suggest that the implementation of a GHG emissions disclosure policy provides a downside protection in times of crisis while limiting the upward potential in bullish periods. Also, less polluting companies perform globally better than polluting ones, except when the latter disclose their environmental information in downward periods. Implications - The measurement of the GHG emissions disclosure factor and other materiality factors in general, provides a clearer measure of the companies’ societal impact since the aggregation of ESG companies affects the entire society.