New Lazard Climate Center evidence shows that voluntary disclosure offsets part of the financial penalty associated with higher emissions

This morning, the Lazard Climate Center released a new analysis of how climate disclosure and commitments affect company valuations in the stock market.

The new analysis confirms previous work from the climate center showing that higher emissions are associated with lower valuations (in the form of price-earnings ratios, adjusting for other characteristics of firms).

It then goes on to show that voluntary disclosure of emissions can offset a significant portion of the price-to-earnings discount associated with those emissions, especially for firms in energy and industrials. This is likely because in the absence of disclosure, investors assume the worst.

Committing to future emissions reductions, by contrast, does not seem to be rewarded by the stock market. In this sense, investors want to see action, not words -- and will reward firms as emissions actually come down, not for promises to do so in the future.

There's a lot more in the paper itself. The research, done in conjunction with Zach Halem, Joe Aldy, Patrick Bolton, and Marcin T. Kacperczyk, can be found here.

More broadly, the Lazard Climate Center continues to produce rigorous, relevant, and timely evidence on how markets, companies, and climate change interact. For more on the center, see here.