The financial impact of carbon risk and mitigation strategies: Insights from the automotive industry
Articolo
Data di Pubblicazione:
2022
Abstract:
The automotive industry is one of the most polluting manufacturing industries and one of the most important in
terms of the workforce employed. Therefore, understanding the impact of climate change on this industry is of
interest to policymakers, capital providers, and managers. To this end, this study provides insights into the
financial impact of carbon risk and mitigation policies adopted by automobile companies. It adopts an
accounting-based approach based on profitability ratios and a market-based perspective based on Tobin’s q
measures. The sample includes car manufacturers and component manufacturers, thus providing a comprehensive
overview of the automotive industry along its supply chain. The results suggest possible difficulties in
accessing capital in the future, or more expensive conditions, for higher-polluting firms, which are the most in
need to make the transition to cleaner production. The findings indicate a robust and consistently negative association
between carbon emissions and financial performance, which are related to lower returns on sales and
capital inefficiency for higher-emitting firms. Evidence also suggests a negative impact of carbon emission
mitigation strategies on financial performance measures, which increases with carbon risk. Results are not
compelling for climate-related disclosure.
Tipologia CRIS:
03A-Articolo su Rivista
Keywords:
Automotive industry
Transition risk
Carbon emissions
Mitigation strategies
Profitability ratios
Tobin’s q
Elenco autori:
Palea V.,
Santhià C.
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