Carbon disclosure, greenhouse gas emissions and market value of FTSE 350 firms – evidence from voluntary carbon disclosers versus non-disclosers

Abstract

ABSTRACT In 2013, a carbon disclosure mandate was adopted by UK-listed companies. This motivated our study to explore the effects of the 2013 carbon disclosure regulation (CDR) and Greenhouse Gas (GHG) emissions on firms’ market value for voluntary disclosers versus non-disclosers pre- and post-2013 CDR. Using a sample of FTSE 350 firms in a short (2010–2016) and long window (2010–2020), our difference-in-differences design shows a beneficial (adverse) effect of the 2013 CDR on market value for voluntary carbon disclosers (non-disclosers). Also, we document the negative impact of GHG emissions on market value after the 2013 CDR for voluntary disclosers. In contrast, a somewhat positive GHG-market value nexus is noted in the case of non-disclosers post-2013 CDR. Our evidence suggests that voluntary carbon disclosers are heavier GHG emitters and, hence, bear much higher environmental risks/liabilities, a negative attribute that became ever more taxing to their market value after the 2013 CDR. HIGHLIGHTS The UK's 2013 carbon disclosure regulation (CDR) influenced the market values differently for firms based on their disclosure behaviours, showing a positive (negative) impact for voluntary carbon disclosers (non-disclosers). In the post-CDR era, the GHG emissions of voluntary disclosers were penalized with lower market value while the GHG emissions of non-disclosers were somewhat rewarded with higher valuation. Compared to non-disclosers, voluntary disclosers are typically larger emitters facing greater environmental risks after the CDR; a negative attribute that continues to undermine their market valuation.