Discussion paper

DP6698 Voluntary Corporate Environmental Initiatives and Shareholder Wealth

Researchers debate whether environmental investments reduce firm value or can actually improve financial performance. We provide some first evidence on shareholder wealth effects of voluntary corporate environmental initiatives. Companies announcing membership in Climate Leaders and Ceres - two voluntary environmental programs related to climate change - experience significantly negative abnormal stock returns. The price decline is smaller in carbon-intensive industries, where regulatory actions are more likely, and for high book-to-market firms, suggesting that "green" expenditures crowd out growth-related investments. We also document insignificant announcement returns for portfolios of industry rivals. Overall, the environmental investments appear to conflict with shareholder value-maximization. This has far reaching implications since the U.S. government relies on voluntary initiatives to reduce the emissions of greenhouse gases.


Thorburn, K and K Fisher-Vanden (2008), ‘DP6698 Voluntary Corporate Environmental Initiatives and Shareholder Wealth‘, CEPR Discussion Paper No. 6698. CEPR Press, Paris & London. https://cepr.org/publications/dp6698