Abstract
This article examines stock return and financial performance of firms that voluntarily participated in the Chicago Climate Exchange’s emissions-reduction program. Findings reveal that the stock price of firms joining the program increased by a small, statistically significant amount during the announcement period. Stocks overperformed by about 8% during the first year after the announcement. Financial performance of participating firms also improved compared to a matched sample of non-participating firms. Results support the hypothesis that sustainable business practices provide quantifiable benefits to participating corporations and do no harm to the financial status of the firm, while potentially improving the environment.
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