When it comes to corporate climate action, a single policy isn’t enough

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

Policymakers consider the private sector to be an important influence on climate action. As investors continue to become more interested in effective climate strategies, they are expected to redirect capital toward 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 tangible 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 disclosed their climate policies between 2010-2022. Some companies reported single climate policies, while others reported a range of policies addressing various areas, including emission targets, financial incentives, and monitoring standards. The data show that single climate policies show no clear association with reduced emissions, but companies with a comprehensive mix of policies show an average of more than 20% emission reductions over the studied time period.

These results suggest that individual corporate climate policies have limited value for policymakers and investors interested in supporting climate action. Instead, the data indicates that policy decisions and disclosure mandates should focus on bundles of complementary policies. The authors note that further research will be necessary to assess the effect of corporate policies compared to local governmental regulations, as well as the reliability of corporate reporting.

Ms Klaaßen adds: "Our study suggests that while individual corporate climate policies provide limited insight into 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 credible emission reduction efforts, while also cautioning against relying solely on disclosure to redirect capital flows effectively."

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In your coverage please use this URL to provide access to the freely available article in PLOS Climate: https://journals.plos.org/climate/article?id=10.1371/journal.pclm.0000458 

Citation: Klaaßen L, Lohmüller C, Steffen B (2024) Assessing corporate climate action: Corporate climate policies and company-level emission reductions. PLOS Clim 3(11): e0000458. https://doi.org/10.1371/journal.pclm.0000458

Author Countries: Germany, Switzerland

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