Master Thesis :"What is the influence of corporate carbon key figures on the cost of capital in a comparative analysis of European utility companies ?"

Abstract

The Paris Agreement, an international treaty on climate change, was adopted by 196 states and started a legislative and economic race to limit global warming. Based on this, the EU presented the EU Green Deal in 2019 as the overarching legal framework aiming for the global objective of the Paris Agreement. As part of the EU Green Deal, the EU intends to decouple economic growth from resource use and ensure no net emissions of greenhouse gases by 2050. I investigated whether the environmental performance in the European utility industry is a corporate financial cost or benefit. Altogether, I found both positive and negative linear correlations between corporate carbon emissions and the cost of capital in the European utility industry in the period between 2015 and 2022. On the one hand, an inverse linear correlation is explainable by conservative investors' belief that increased carbon emissions as an indicator signals increased production and economic growth. On the other hand, a positive linear correlation is explainable by the existence of a carbon (-transition) risk.