Early adoption of protocols a factor.
Conventional wisdom suggests that when a company generates more carbon emissions, investors should lower its stock price. After all, the company is generating a socially undesirable byproduct.
Future carbon pricing initiatives by governments will also add extra obligations to the balance sheet. Prior analyses of Australian, U.S. and European firms corroborate this line of reasoning. However, Canadian firms’ stock prices do not subscribe to this conventional view, suggests research by Paul Griffin, professor at the University of California, Davis, Graduate School of Management and lead author of a recent study.
“We find a positive relation between the market value of Canadian firms and the level of their greenhouse gas emissions. This positive relation has strengthened in recent years, mainly for high emissions-intensity firms in the Canadian energy sector,” he said. This is due to a couple of factors, including that Canada adopted greenhouse gas protocols earlier than other countries, and that Canada has national and subnational expenditure policies that offset climate impacts on the economy, he explained.
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