The Impact of Carbon Disclosure Mandates on Emissions and Financial Operating Performance

49 Pages Posted: 16 Sep 2020

See all articles by Benedikt Downar

Benedikt Downar

Technische Universität München (TUM)

Jürgen Ernstberger

Technische Universität München

Stefan J. Reichelstein

Stanford University - Stanford Graduate School of Business; CESifo (Center for Economic Studies and Ifo Institute)

Sebastian Schwenen

Technische Universität München (TUM); German Institute for Economic Research (DIW Berlin)

Aleksandar Zaklan

German Institute for Economic Research (DIW Berlin)

Multiple version iconThere are 3 versions of this paper

Date Written: 2020

Abstract

We examine whether a disclosure mandate for greenhouse gas emissions creates stakeholder pressure for firms to subsequently reduce their emissions. For UK-incorporated listed firms such a mandate was adopted in 2013. Using a difference-in-differences design, we find that firms affected by the mandate reduced their emissions – depending on the specification – by an incremental 14-18% relative to a control group. This reduction was accompanied by an average 9% increase in production costs. At the same time, the treated firms were able to increase their sales by an almost compensating amount. Taken together, our findings provide no indication that the disclosure requirement led to a significant deterioration in the financial operating performance of the treated firms, despite the significant carbon footprint reduction following the disclosure mandate.

Keywords: Disclosure of non-financial information; mandatory disclosure, greenhouse gas emissions; real effects

JEL Classification: Q28, Q40, M41, M48

Suggested Citation

Downar, Benedikt and Ernstberger, Jürgen and Reichelstein, Stefan J. and Schwenen, Sebastian and Zaklan, Aleksandar, The Impact of Carbon Disclosure Mandates on Emissions and Financial Operating Performance (2020). ZEW - Centre for European Economic Research Discussion Paper No. 20-038, Available at SSRN: https://ssrn.com/abstract=3693670 or http://dx.doi.org/10.2139/ssrn.3693670

Benedikt Downar (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

Jürgen Ernstberger

Technische Universität München ( email )

Arcisstraße 21
Munich, 80333
Germany

Stefan J. Reichelstein

Stanford University - Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-736-1129 (Phone)
650-725-7979 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Sebastian Schwenen

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Aleksandar Zaklan

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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