Do Green Stars Shine Bright? Market Reaction to Carbon Disclosure Project ‘A’ List Inclusion

Abstract

This study investigates how shareholders respond to firms’ inclusion in the Carbon Disclosure Project (CDP) ‘A’ list, which recognizes companies for leadership in environmental disclosure and action. Using a global sample of firms and an event study methodology, we analyze abnormal stock returns around the announcement date. The results show a significant negative market reaction to CDP ‘A’ list inclusion, indicating that investors view environmental leadership as a cost rather than a value-enhancing signal. The negative effect is robust across subsamples based on country, industry type and disclosure category, with particularly strong reactions when firms are recognized across multiple categories. These findings provide the first global evidence on stock market responses to CDP ‘A’ list announcements. They extend the literature on environmental disclosure by demonstrating that investors may penalize even the highest-rated firms, with important implications for corporate managers, policymakers and sustainable investment strategies.