A1712
Title: Asset pricing of carbon emission disclosure
Authors: Petter Dahlstrom - KTH Royal Institute of Technology (Sweden)
Hans Loof - Royal Institute of Technology (Sweden)
Maziar Sahamkhadam - Linnaeus University (Sweden)
Andreas Stephan - Linnaeus University (Sweden) [presenting]
Abstract: The science-based targets initiative (SBTi) aims to reduce carbon emissions among participating firms. A multi-factor specification is suggested that augments the traditional factor models with the SBTi risk factor. The EIV-bias-corrected cross-sectional regression approach is applied to investigate whether (i) there exists a SBTi transition premium, and (ii) this premium is priced as a systematic risk or firm-level characteristic. Based on a sample of 757 SBTi committed international firms and a control group consisting of 748 peers as non-committed firms over the period 2018-2022, a positive SBTi transition premium is found. The statistically significant alphas indicate inabilities in pricing this SBTi transition premium via the classical Fama-French multi-factor models. It is found that the SBTi characteristic explains the transition premium.
