WEAI/AERE 2009 - Individual Paper Abstract
Title: The determinants of voluntary carbon disclosure
Author(s): Joshua Skov, Doctoral student, Environmental Science Studies and Policy (ESSP) and Department of Economics, University of Oregon, jskov@uoregon.edu
Abstract:
Recent years have brought a deluge of voluntary disclosure and claims by firms about their environmental performance, in parallel with rising concerns among policymakers and the public about a wide range of environmental issues. In particular, business and financial leaders have gradually come to believe that climate change represents an increasingly concrete threat to the world economy as a whole (Stern 2006) and disproportionately to particular economic sectors (David Gardiner & Associates 2007). In response, a number of public-sector and non-governmental efforts have sought to provide structure to disclosures specifically related to greenhouse gas emissions, to increase the frequency and depth of these disclosures, and to raise the quality of the information disclosed.
In this paper, I investigate the results of one such successful effort, the Carbon Disclosure Project (CDP), a framework within which to report and discuss the development of corporate climate change strategies. CDP, on behalf of the many large financial institutions and institutional investors that are its members, makes a uniform annual informational request of the largest companies in the world's largest economies, and then it posts the disclosures to its web site. In 2008, more than half of the Standard and Poors 500 and 77% of the Global 500 responded to CDP's disclosure request, its sixth annual appeal. This paper focuses on the determinants of disclosure by the S&P 500.
Proposed methods consist of several forms of examining discrete choice, including probit, polychotomous logit, nested logit, random parameters and a gravity model. The paper uses a unique data set, assembled for the analysis from a variety of new sources. First and foremost, the analysis rests on the publicly available data from the Carbon Disclosure Project (CDP). CDP describes on its web site the responses to its requests for carbon disclosure from the world's largest corporations. This analysis starts with CDP's basic disclosure information, accumulated over the past eight years. Second, the proprietary CompuStat database aggregates firm-level data on financial structure and financial performance of public companies. Third, the Economic Input-Output Life-Cycle Analysis (EIOLCA) database created by Green Design Institute at Carnegie-Mellon University furnishes detailed data on the extent and patterns of greenhouse gas intensity of economic activity across 492 sectors that map uniquely to NAICS codes. Finally, there are several strategic proxies for firm intentions and strategy, including other independent rankings and assessments of corporate behavior.
Implications of this framework for the scope and design of mandatory and other voluntary programs of environmental disclosure will be briefly examined.