The Value Relevance of a Firm's Carbon Risk Profile
Why this work is in the frame
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Bibliographic record
Abstract
The aim of this paper is to provide insights into the capital market's role in incentivizing firms to engage meaningfully in the transition to a net zero carbon emissions economy. We investigate whether capital markets negatively value a broader concept of carbon risk exposure in addition to its historic carbon footprint and offset assessed penalties by considering carbon mitigation activities undertaken by the firm. We develop a conceptual framework of a firm's ‘carbon risk profile’ from the literature comprising: (a) carbon risk exposure (current emissions and broader risk notions of fossil fuel dependency and carbon visibility); and (b) carbon mitigation activities (realized emissions reductions and anticipatory proactive activities). We confirm and operationalize this framework using interviews with managers and environmental, social, and governance analysts. Based on a sample of 310 firm‐year observations for ASX200 firms from 2014–2020 in high‐carbon sectors, our results suggest material valuation penalties for the broader carbon risk exposure concept. Further, we find that capital markets attach value to a firm's intangible capability to proactively mitigate its carbon risk exposure. Building on these results, to further mobilize capital markets in the push towards net zero emissions, policymakers and regulators may wish to undertake initiatives to increase carbon‐related disclosures on both risks and mitigation activities.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.000 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it