Does It Pay to (Pledge to) Be Green? The Impact of Committing to Become 100% Renewable on Stock Returns

Abstract

With an increasing number of consumers showing an interest in whether corporations are engaging in socially responsible actions, much work has been done on the possible benefits of corporate social responsibility. In light of the ongoing debate, this study focuses on stock market reactions to joining the RE100 initiative and thus pledging to become 100% renewable. Using an event study methodology, this work finds that pledging had no significant impact on stock returns for the aggregate group of companies investigated, as an average insignificant cumulative abnormal return of -0.05% is noted for the 3-day window beginning on the day of announcement. A further breakdown performed by size reveals that firms with market capitalizations less than $1 billion at the time of announcement experienced average cumulative abnormal returns of 0.6%, while firms with market capitalizations greater than $1 billion experienced, on average, cumulative abnormal returns of -1.1%. Analysis by region shows that firms listed in non-Nordic European countries and the aggregate group of internationally-listed firms experienced average cumulative abnormal returns of -1.6% and -1.1%, respectively. Investigation by industry grouping does not reveal significant results.