What is the impact of integrating the reduction of CO2 emissions into the financial valuation of companies, and how does this influence their practices and performance?

Details

Supervisors

Denis Knaepen

Faculty

Louvain School of Management

Degree label

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

Abstract

The growing urgency to address climate change has elevated the concept of corporate environmental responsibility (CER) to a prominent position within the business discourse. The incorporation of environmental factors, particularly those referring to carbon dioxide (CO2) reduction, into financial valuation models represents a complex and evolving field of study. The aim of this thesis is to investigate the effect of incorporating CO2 emission reduction into the financial valuation of companies and how this affects their practices and performance. The research combines a comprehensive literature review with an empirical study based on semi-structured interviews with key stakeholders from various industrial sectors. The findings demonstrate that the relationship between CO2 reduction and financial performance is complex and contingent upon contextual factors. While companies anticipate long-term benefits such as cost savings, enhanced competitiveness, and improved market positioning, they also encounter challenges such as high upfront costs and uncertain returns on investment in the short term. The study emphasises the increasing significance of market-based instruments, regulatory frameworks and investor perceptions in motivating corporate decarbonisation initiatives. Furthermore, it highlights the strategic necessity of integrating CO2 reduction for long-term sustainability and competitiveness in a low-carbon economy. The thesis ultimately concludes that while the immediate financial consequences of decarbonisation can be challenging, the long-term benefits for companies and investors are indisputable.