Mandatory Corporate Carbon Disclosure: Evidence from a Natural Experiment

Abstract

We study the introduction of a unique law in the United Kingdom that mandates publicly listed firms to disclose their greenhouse gas emissions (GHG) in a standardized way in their annual reports. Firms respond to the law by reducing GHG emissions by about 16 percent. They do so primarily through a reduction in energy usage. Examining why firms reduce emissions we present evidence consistent with the view that the regulation made disclosing high GHG emissions more costly and also facilitated comparisons across firms.

Keywords: Mandatory disclosure regulation, greenhouse gas emissions, climate change mitigation, climate finance, financial performance, institutional investors

JEL Classification: G28, G18, G38, K22, K32, L51, M48, Q52, Q54