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An Empirical Approach to Integrating Climate Reputational Risk in Long-Term Scenario Analysis

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 28 Mar 2023 Italy Publisher:MDPI AGJournal:Sustainability, volume 15, page 5,886 (eissn: 2071-1050,

Authors: Guastella G.; Pareglio S.; Schiavoni C.;

doi: 10.3390/su15075886

handle: 10807/248234

An Empirical Approach to Integrating Climate Reputational Risk in Long-Term Scenario Analysis

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Abstract

We propose an empirical approach to estimate the impact of climate transition risk on corporate revenues that specifically accounts for reputational risk. We employ the information on disclosed Scope 3 emissions to proxy companies’ carbon footprint along the value chain. A threshold regression is employed to identify the emission level above which reputational risk impacts revenues, and we link this impact to a climate policy stringency indicator. We estimate the threshold regression on a sample of companies within the European Union (EU), and find the threshold at around the 70th percentile of the Scope 3 emissions distribution. We find that companies with Scope 3 emissions beyond the threshold experienced substantially lower revenue growth as climate policies have become more stringent, compared to other companies.

Country

Italy

Related Organizations

Keywords

Environmental sciences, Scope 3 emissions, Environmental effects of industries and plants, TJ807-830, GE1-350, scenario analysis, TD194-195, climate reputational risk, Renewable energy sources, climate reputational risk; scenario analysis; Scope 3 emissions

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