ESCP Prof. Franck Bancel guest-edited BMI’s special issue on green finance, writing the editorial and an article about the impact of carbon pricing on company valuation.
“One of the major challenges of the coming century is to develop a carbon neutral economy that will address global warming issues,” writes ESCP Business School professor of finance Franck Bancel in the introduction to the thematic issue Bankers, Markets & Investors devoted to green finance. According to him, significant investments are required to reach the goal that is the transition from dependence to fossil fuels, especially in the sectors that emit the most carbon (energy, transport, housing etc.).
“Finance has a key role to play in this process,” he adds. “The issue is, of course, to finance this energy transition but also to propose new frameworks to value assets, measure the performance of projects and manage their risks.” In this context, he claims, companies, investors and academics have to face a new set of challenges which he goes on explaining in detail.
As part of the editorial committee in charge of this special issue, professor Franck Bancel selected four articles that address important questions and illustrate the diversity of research on green finance. This includes the one he co-wrote with Henri Philippe, partner at Accuracy, which questions the impact of carbon prices on company valuations. “We show that the information on carbon emitted by companies is relatively limited and derived from multiple sources,” they sum up. “Based on carbon price development scenarios prepared by international organisations and companies, we present a range of simulations that show the major impact of the ‘carbon’ variable when valuing companies in the oil and gas sector. We conclude that the reduction of emissions is a key issue for firm valuation.”
Their results lead them to recommend that investors take an interest in the price of carbon in their valuations, as well as in the way in which public authorities will implement this taxation and the way in which companies will communicate on this subject in the future.