Using an original, hand-collected dataset of net-zero committed companies and commitment dates, we found that:1
Capital markets do not penalize companies for climate pledges in the short term:
- There is no significant abnormal stock price reaction (positive or negative) in the immediate days following a net-zero commitment announcement.
- The findings are consistent controlling for individual year, geographic region, and sector, with segmented analysis revealing no significant or material differences in performance (positive or negative).2
- There is a significant increase in trading volume post-commitment, which may be due to a rotation in shareholder base – either way, its impact on near-term corporate valuation is immaterial.
Net-zero companies have significantly outperformed in the past three-to-five years:
- An index of companies that have made net-zero pledges outperformed the MSCI ACWI benchmark by over 10% (3% annually, adjusted for industry) from 2018-2021.
The fixed income markets reward companies with net-zero commitments:
- On average, green bonds issued by net-zero committed companies trade at a 6-basis point (BP) premium compared to traditional bonds on the secondary market; there is no difference in premium between green and traditional bonds (with similar characteristics) at companies that have not made a net-zero commitment.
Companies that have a clear climate strategy, maintain a consistent message on climate, and deliver on interim decarbonization goals can build buy-in among investors, ensuring their valuations are more reflective of a decarbonized business model over time.
Download Unpacking the Value of Corporate Net Zero Commitments
1 For more on our convention on the use of the terms “climate pledge”, “net-zero commitment”, “decarbonization goal”, see the Methodology section of the appendix.
2 Of note, we did find that the more carbon-intensive sectors had positive abnormal returns at the 10% significance level, suggesting that investors may place more value on commitments from more carbon-intensive firms. For more, see the results section.
