“Reducing CO2 Emissions and Following TCFD Guidelines: Impact on Company Equity Costs”

Kyushu University researchers have discovered a significant link between corporate climate change mitigation actions and the cost of capital for companies. Their study, published in Corporate Social Responsibility and Environmental Management, analyzed data from over 2,100 Japanese listed companies from 2017 to 2021 to understand how reducing CO2 emissions and following Task Force on Climate-Related Financial Disclosures (TCFD) guidelines can impact a company’s financial performance.

The research found that companies in high-emission industries face higher costs for borrowing and raising money due to their carbon emissions. However, companies that adhere to TCFD guidelines and disclose climate-related information experience lower capital costs. This emphasizes the importance of transparency in sharing environmental strategies and data, as stakeholders are more interested in companies’ actions rather than promises.

The study also highlighted that high greenhouse gas emissions increase climate change risks, leading to higher costs of equity and debt for companies. By sharing climate-related data, companies can provide investors and consumers with a clearer picture of their environmental efforts, making them more attractive for investment. This transparency is particularly crucial in energy sectors where climate change is a major concern.

While the study focused on Japan, its findings have global implications for investors, companies, and policymakers. With Japan mandating TCFD guidelines for listed companies since 2022, more businesses are engaging in climate mitigation efforts. The researchers plan to expand their analysis globally to understand how regulations and cultural differences impact the relationship between climate change actions and capital costs in various regions.

The study’s authors, including Professor Shunsuke Managi and Associate Professor Alexander Ryota Keeley, have established a start-up called aiESG to analyze the sustainability of global supply chains using AI-based systems. Their research aims to support companies in developing new strategies, changing behaviors, and ultimately reducing emissions to address the global climate crisis.

Kyushu University, one of Japan’s leading research-oriented institutes, continues to drive social change with integrative knowledge through its VISION 2030 initiative. By strengthening research in decarbonization, medicine and health, and environment and food, the university aims to tackle society’s most pressing issues and contribute to a sustainable future.