Investors Are Punishing the Polluters. Here’s Proof.
New data demonstrate how corporate valuations fall when greenhouse-gas emissions rise.
Investors reward energy companies for lowering emissions.
Photographer: Christopher Furlong/Getty ImagesThe corporate sector has a leading role to play in the world’s response to climate change. The data accumulated so far make it clear that the more greenhouse gases a company emits, the lower its stock price relative to its earnings.
This effect — in a sense a climate discount — is influenced by climate risk, by emissions regulations and carbon pricing, and by attention from investors and the public. Those factors lead to larger discounts in some sectors and market-cap sizes than in others. So it’s clear the stock market is already rewarding companies that reduce emissions with higher valuations. And because this investor response will probably grow over time, the market incentive to lower emissions will, too.