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Corporate motivations and co-benefit valuation in private climate finance investments through voluntary carbon markets

by Paul Morgan

Title: Corporate Motivations for Voluntary Investments in Carbon Offset Projects: A Study

The increasing concern over climate change and its impact on the environment has led to a growing interest in carbon offset projects as a means to reduce greenhouse gas emissions. In recent years, many corporations have voluntarily invested in these projects to mitigate their carbon footprint. However, the motivations behind such investments and the prioritization of local co-benefits in the decision-making process remain unclear. This study aims to investigate these aspects and contribute to the existing literature on corporate sustainability efforts.

Research Questions:
1. What are the motivations driving corporations to purchase offsets?
2. How does the willingness to pay for additional co-benefits of offsets vary among companies driven by different motivations?

Data Sources:
To address these research questions, the study utilizes two primary data sources: published Corporate Social Responsibility (CSR) reports and self-reported data from the Carbon Disclosure Project (CDP). The CSR reports provide insight into companies’ public stance on social and environmental responsibility, while the CDP data offers information on companies’ emissions and offset investments.

Research Strategy:
The study employs a mixed-method approach for comprehensive data analysis and research question resolution. A qualitative analysis approach is used to analyze the motivations and co-benefits identified in the data, while a quantitative analysis is conducted to test the hypotheses developed based on the research questions.

Hypothesis 1: Companies primarily motivated to reduce emissions will prioritize the purchase of cost-effective offset projects, opting for lower-cost options.
Hypothesis 2: Companies driven by non-emissions-related impacts, such as market competitiveness and company values, will place a higher value on co-benefits and may be willing to pay a premium for offsets that achieve these impacts.

The study assesses the convergence of corporate decision-making, co-benefits of climate finance projects, carbon offsets, and sustainability in the context of the voluntary carbon offset (VCO) market. This market serves as a lens to understand how companies value sustainable benefits in their decision-making process.

Data Collection:
The study focuses on companies that have engaged in carbon offset activities in 2017, allowing for a comprehensive analysis. The availability of CSR reports and sustainability reports was verified, and a total of 186 reports were retained for analysis. The companies were classified by industry using the Bloomberg Industry Classification Systems, and project characteristics were obtained from the CDP data.

By investigating corporate motivations for voluntary investments in carbon offset projects and the prioritization of local co-benefits, this study contributes to the existing literature on corporate sustainability efforts. The findings from the qualitative and quantitative analysis will shed light on the drivers behind corporate offset investments and the willingness to pay for additional co-benefits. Understanding these motivations can inform future sustainability strategies and policies to encourage more companies to invest in carbon offset projects.

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