Trustworthiness of corporate renewable energy commitments and its impact on the cost of capital

Abstract

The world is beginning to sympathize with the seriousness of the climate crisis, and the social interest in responding to it is growing. Now, companies are presenting their ESG activities to the market to meet the market's needs. Accordingly, research related to corporate ESG and corporate performance has been dealt with in various forms and is attracting attention. However, among them, consensus on the impact of ESG activities related to renewable energy on corporate performance has not been reached. Furthermore, there is insufficient research on whether the company's commitment to this transition to renewable energy will be properly trusted without being recognized as 'green washing' in the market. Therefore, in this paper, we will analyze whether a company's renewable energy commitment has a financial effect on the market, examine the moderating effect according to environmental performance, and analyze which company's commitment to implement renewable energy is trusted in the market. Bloomberg and CDP used financial data from 1028 companies for 2013-2020, carbon emissions, and RE100 declarations, and conducted a panel analysis to conduct a study. According to the research results, a company's commitment to implement renewable energy affects lowering a company's financing cost, and a company with high carbon emissions declares a commitment to implement renewable energy in recognition of its trust in the market. This result is expected to be a good indicator for companies that have difficulty in implementing renewable energy conversion due to high carbon emissions.