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Addressing companies' low-carbon transition challenges requires diversified investments in environmental initiatives

Cenci, Simone; Tang, Samuel; (2024) Addressing companies' low-carbon transition challenges requires diversified investments in environmental initiatives. Climatic Change 10.1007/s10584-024-03816-0. (In press). Green open access

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Abstract

The energy, utilities, industrial, and material sectors are crucial suppliers of essential goods and services, but their business operations are among the largest sources of anthropogenic greenhouse gas emissions. Consequently, companies in these sectors play a pivotal role in the low-carbon transition and face substantial stakeholder pressure to manage their transition risks and reduce their environmental impact. Here, we argue that effective responses to transition challenges require diversifying investments in adaptation and mitigation initiatives across a broad range of activities and goals. Analysing financial and nonfinancial data from a global sample of publicly traded companies, we find that those who extensively diversify their investments are better able to reduce their emissions over time. Diversification also reduces carbon pricing risk, thereby lowering exposure to transition risks, under several climate policy scenarios. Our findings provide empirical evidence that business leaders in critical sectors for the low-carbon transition should incorporate well-diversified investments in adaptation and mitigation initiatives into their sustainability strategies to manage interconnected transition challenges.

Type: Article
Title: Addressing companies' low-carbon transition challenges requires diversified investments in environmental initiatives
Open access status: An open access version is available from UCL Discovery
DOI: 10.1007/s10584-024-03816-0
Publisher version: https://doi.org/10.1007/s10584-024-03816-0
Language: English
Additional information: This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
Keywords: Response diversity, Sustainability behaviour, Transition risk
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/10199314
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