How Practices Like SBTs Drive Corporates’ Climate Transition

Authors: Niklas Gehrke, Malte Hessenius, Raphael Tietmeyer

Publication date: April 2023

Embedded in the context of transition finance and our ClimLabels research project, this empirical research paper explores the effectiveness of sustainable management practices in reducing corporate carbon emissions. Using a global dataset thousands of publicly listed firms from 2010 to 2022, the study assesses the impact of various practices, including science-based targets (SBTs), executive compensation linked to climate goals, and green expenditure, on (future) corporate carbon performance. One of the key findings is that firms with science-based targets see a significant reduction in emissions, while other management practices show varied effects.

Key Findings:

• Firms with validated science-based targets (SBTs) achieve a 4% to 15% reduction in carbon emissions.
• Other indicators like executive compensation related to climate change and green expenditure do not consistently lead to lower emissions.
• The study highlights the importance of ambitious environmental management practices in GHG-intensive sectors.

Funding & Acknowledgments:
This research was supported by the German Federal Ministry of Education and Research (BMBF) under the project “Transition Labels in Climate Finance (ClimLabels).”

Download the paper here from SSRN.