When it comes to corporate climate action,

Climate-conscious investors should consider supporting companies with a broad range of climate policies, rather than companies that arbitrarily select specific individual policies, according to a study published Nov. 13, 2024, in the open-access journal PLOS Climate by Lena Klaaßen of ETH Zurich. , Switzerland and colleagues.

Policymakers see the private sector as having a significant impact on climate action. As investors continue to become more interested in effective climate strategies, they are expected to direct capital to companies with promising climate policies. Over time, more companies are publicly disclosing their climate policies, but limited research has explored the relationship between corporate climate policy and concrete improvements in company-wide greenhouse gas emissions.

In this study, Klaaßen and colleagues compile data on policy and emissions from the CDP dataset for more than 1,700 companies that announced their climate policies between 2010 and 2022. Some companies have reported single climate policies, while others have reported a range of policies addressing various areas, including emissions targets, financial incentives and monitoring standards. The data shows that single climate policies do not show a clear relationship with reduced emissions, but companies with a comprehensive mix of policies show average emissions reductions of more than 20% over the time period studied.

These results suggest that individual corporate climate policies are of limited value to policymakers and investors interested in supporting climate action. Instead, the data suggest that policy decisions and disclosure mandates should focus on complementary policy packages. The authors note that further research will be necessary to evaluate the impact of corporate policies compared to local government regulations and the reliability of corporate reporting.

Ms. Klaaßen adds: “Our study shows that while individual corporate climate policies provide limited information on companies’ climate performance, a comprehensive policy mix shows a stronger association with lower absolute emissions. These findings highlight the value of comprehensive climate disclosures to help investors identify firms with reliable emissions.” “With mitigation efforts, it also warns against relying solely on disclosure to effectively direct capital flows.”

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Please use this URL to access the article that is freely available in your scope. PLOS Climate: https://journals.plos.org/climate/article?id=10.1371/journal.pclm.0000458

Quotation: Klaaßen L, Lohmüller C, Steffen B (2024) Evaluating corporate climate action: Corporate climate policies and company-level emission reductions. PLOS Clim 3(11): e0000458.

Author Countries: Germany, Switzerland

Financing: LK and BS received funding for this project from the European Research Council of the EU Horizon 2020 research and innovation program (grant agreement no. 948220, project no. GREENFIN), including salaries for both researchers. The funder had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

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