The Impact of Voluntary Carbon Goal Announcements on Stock Returns

This study quantifies the impact of voluntary carbon goal announcements on cumulative abnormal stock returns (CAR). Using 188 announcements of U.S. publicly traded firms between 2018 and 2024 across a variety of industries, this event study offers new and economically relevant insights on when and how firms should announce their carbon goals. First, a voluntary carbon goal announcement is associated with 0.65% positive CAR for the main event window (−2,+2), which translates to an increase of about $490 million based on the average market capitalization of firms in our data set. Notably, despite the substantial financial commitments implied by carbon neutrality, this corresponds to an average gain of about $75 in abnormal return per current ton of CO₂-equivalent emissions. Second, our analysis of announcement-related media coverage using topic modeling reveals that investors respond more positively when the media highlights the expected business impact of the carbon goal. Third, firms with higher current emissions in the scopes they commit to eliminate are evaluated more favorably by the stock market, suggesting that investors value the larger emission reduction volume associated with such commitments. Finally, the positive effects of emphasizing business impact and promising to eliminate higher current emissions diminish over time. We conduct a series of robustness checks to ensure that our results are reliable and unbiased. Overall, this study provides a strong empirical foundation for understanding the consequences of voluntary carbon goal announcements of firms and discusses implications for theory and practice.

This paper was accepted by Anita McGahan, business strategy.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.08673.