The Relevance to Investors of Greenhouse Gas Emission Disclosures

This study by Professor Paul Griffin and co-authors David H. Lont from the University of Otago and Yuan Sun from the University of California, Berkeley Haas School of Business documents that investors care about companies’ greenhouse gas (GHG) emission disclosures.

The authors present two kinds of evidence to support this finding. First, they show that investors act as if they use GHG emissions information to assess company stock market value. Second, by conducting an event study, they observe a significant market response around the date a company discloses new climate change information in a press release or 8-K filing. Sensitivity tests show that these findings are robust to alternative ways to model company value and assess the news content of emissions information. As anticipated, the study’s results strengthen for companies in the U.S. environment and for emission-intensive industries, such as utilities and energy. Lastly, the results convey a message to those companies that may have chosen not to disclose GHG emissions, in that the authors find that investors view estimates of non-disclosed GHG emission amounts as value relevant also.

SEC-registered non-discloser companies might, therefore, reconsider whether their policies adhere to the most basic rule of disclosure – to report “such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.”