Abstract:
This study explores the causal relationship between firms’ climate actions and financial performance. I examined the market reactions associated with announcements of two categories of climate and energy initiatives with the event study approach. The first category includes 20 announcements of major corporations announcing their intent to participate in the U.S. Climate Action Partnership (US CAP) program. The second category includes 100 announcements of these companies’ own specific climate actions or investments. This study finds no significant relationship for the aggregate data or firms’ own climate actions or investments. However, I do find that the market reacts positively to firms’ announcements of participating in the US CAP. This result implies that collective action among corporate leaders does not only have the potential to benefit society in combating climate change, but also to directly create shareholder value.
