Stock returns and carbon intensity in a Nordic setting: Investigating the carbon premium and the impact of the Non-Financial Reporting Directive

Sammanfattning

This thesis investigates whether there is an existing carbon premium within the Nordic countries of Sweden, Denmark and Finland. It also investigates the effects of the implementation of the Non-Financial Reporting Directive on firms’ stock returns and carbon intensity. The sample consists of firm-level statistics and stock returns of 537 firms listed on the OMX Nordic All Share index within the three countries. The carbon premium is estimated using a firm-month panel and fixed-effects regressions. The effects of the Non-Financial Reporting Directive are estimated using the Callaway and Sant'Anna’Anna difference-in-difference estimator, allowing for variation in treatment timing. The fixed-effects specifications provide weak evidence for a minimal carbon premium within the sample. This suggests that investors in the examined markets do not demand a substantial excess return for holding stocks with greater environmental impact. The difference-in-difference estimates show no observable effect on the specified outcome variables in this sample. The analysis is conducted using both an imputed and non-imputed dataset as a robustness check. No substantial differences are observed between the datasets. The study also identifies important limitations and proposes directions for further extensions and improvements.