The effect of Carbon Disclosures on risk and return : A study examining top performers in the CDP Nordic 260 Report 2012 and their risk and return

Abstract: This study presents an evaluation of the top performers in the Carbon Disclosure Project Nordic 260, 2012 report and their risk and return during the first quarter 2011 to first quarter 2013. The chosen companies are based in the performance score presented in the report and as far as possible the top 10 companies from sectors proven to have harder to meet regulations in the field. These where chosen to each represent a portfolio which were tested to their corresponding benchmark Nordic index. Our approach is of quantitative nature and the data is based on the daily return and 30 day volatility from the chosen companies and indexes. The research is built on a deductive approach and will test previous research in the field to our findings. The result lead to the conclusion that a weak positive relation can be found to a higher return in top performers but at the cost of higher risk measured in volatility. A statistical significance to the result were missing, but the paper rather support the positive return in line with previous research in the field. As only the environmental values of Carbon Disclosure were used, the contribution show that these values has a similar effect as all ESG factors.