Epsilon Archive for Student Projects

Abstract

GHG targets, an aspect of carbon disclosure are an integral part of corporate carbon management and overall carbon accounting. GHG targets and the target-related attributes – including target difficulty, target progress, and external validation of target as a science-based target, along with past GHG emission performance are attributes related to carbon information that is increasingly included in the corporate carbon disclosures. However, challenges persist questioning the relevancy of the targets and the effectiveness of its role, not only to corporate carbon management but also to external stakeholders. In this study, the focus is on non-professional investors. Impact investing is a relatively underexplored domain, there is unsettled uncertainty about what implication can carbon information, specific to GHG targets and the target-related attributes, have on investment decision-making. Therefore, this study conducted a discrete choice experiment with a panel of Swedish Non-professional investors to examine the roles of these attributes in influencing investors' preferences on impact investment choices.

The findings from this research study show that GHG attributes are relevant for investors in prioritizing their impact investment choices. The results show the highest preference for target progress followed by target difficulty which is higher than the target being externally validated as science-based. Additionally, the results showed the highest negative estimates for GHG emissions lower than the industry average suggesting aversion towards companies with higher emissions. These results show that these attributes are relevant for investors in making impact investment decisions. However, investors also take other conventional fund attributes like expected return and level of risk associated with the investment alternative into consideration while making investment decisions. The results show the positive return is at least expected even though the willingness to pay estimates from the results suggest that the non-professional investors are willing to forgo part of their expected marginal return for the level of GHG attributes that indicates positive and higher environmental commitment and performance.