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Stock markets, corporate climate pledges, and the Science-Based Target Initiative

Political Science

Stock markets, corporate climate pledges, and the Science-Based Target Initiative

I. Ko and A. Prakash

This intriguing research conducted by Inhwan Ko and Aseem Prakash delves into whether stock markets favor companies that commit to the Science-Based Targets initiative (SBTi). Surprisingly, the findings reveal that SBTi verification has little impact on stock prices, urging policymakers and climate advocates to consider alternative incentives for fostering emission reduction investments.... show more
Abstract
Climate advocates and finance industry titans suggest firms' climate policies have economic payoffs. We examine whether stock markets reward firms that have joined the Science-Based Targets Initiative (SBTI), a voluntary climate program that verifies firms' emission reduction pledges. Our analysis of S&P 500 companies' quarterly stock prices for 2010–2023 finds little evidence that SBTi verification (of any type) increases stock prices. If stock markets are not incentivizing firms to voluntarily undertake climate actions, policymakers and climate advocates need to focus on providing nonfinancial rewards to encourage firms to invest in emission reductions.
Publisher
npj Climate Action
Published On
Aug 11, 2024
Authors
Inhwan Ko, Aseem Prakash
DOI
https://doi.org/10.1038/s44168-024-00148-8
Tags
stock markets
Science-Based Targets
SBTi
emission reduction
financial incentives
climate advocacy
investment

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