Journal of Portfolio Management: Do Corporate Carbon Emissions Data Enable Investors to Mitigate Climate Change?

Investors play an important role in combating climate change. We examine several types of currently available carbon emissions data in their capacity to enable investors to incentivize companies to reduce emissions. We evaluate the information content of estimated current and forward-looking carbon emissions data from four popular data providers. Absent mandatory reporting, and although many companies report their carbon emissions, much emissions data are estimated by data providers. Despite the providers’ claims of accuracy, we find the data on estimated current emissions (often comprising >50% of observations) mostly captures only basic company information (e.g., company size and industry). We find that forward-looking carbon scores from different data providers do not have any power in predicting future changes in emissions. Our analyses suggest that estimated emissions are at least 2.4 times less effective than self-reported emissions. Our results debunk the belief that third-party estimated emissions are a satisfactory substitute for company-reported emissions and call for mandatory and audited carbon emissions disclosure.

Kalesnik, V., Wilkens, M. & Zink, J. (2022) Do Corporate Carbon Emissions Data Enable Investors to Mitigage Climate Change? The Journal of Portfolio Management forthcoming.