Investors with a climate consciousness should opt to back companies that adopt a comprehensive suite of climate policies instead of selecting those that implement only specific, isolated measures. This advice emerges from a study published on November 13, 2024, in the open-access journal PLOS Climate by Lena Klaaßen of ETH Zurich, Switzerland, and her team.

Policymakers regard the private sector as a pivotal force in driving climate initiatives. As investors become increasingly focused on robust climate strategies, they are likely to channel their investments towards companies that demonstrate a proactive stance on climate issues. With an uptick in companies openly sharing their climate strategies, there has been a corresponding interest in analysing how these policies translate into actual reductions in corporate greenhouse gas emissions.

In their research, Klaaßen and her team analysed data concerning policy and emissions obtained from the CDP dataset, which encompasses over 1,700 companies that disclosed their climate policies from 2010 to 2022. The findings revealed that companies endorsing only a singular climate policy did not consistently demonstrate significant emissions reductions. However, those with diverse policies, including emission targets, financial incentives, and monitoring standards, showed a notable average reduction in emissions of more than 20% across the years evaluated.

These findings underline that standalone corporate climate policies might hold limited utility for policymakers and investors aiming to foster substantive climate action. The study advocates for a shift in policy decisions and disclosure requirements towards embracing a collection of complementary policies. The researchers highlighted the need for additional studies to evaluate further the impact of corporate policies relative to local government regulations and the dependability of corporate emissions reporting.

Ms Klaaßen noted, “Our study indicates that while individual corporate climate policies might provide limited insights into a company’s actual climate performance, a broad spectrum of policies is more strongly correlated with significant reductions in absolute emissions. This revelation underscores the importance of comprehensive climate disclosures in aiding investors to pinpoint companies with genuine emission reduction commitments. However, it also cautions against an overreliance on disclosures as the sole mechanism for redirecting capital effectively towards sustainable ventures.”

More information: Lena Klaaßen et al, Assessing corporate climate action: Corporate climate policies and company-level emission reductions, PLOS Climate. DOI: 10.1371/journal.pclm.0000458

Journal information: PLOS Climate Provided by PLOS