Firm commitments on climate change: Effects of science-based targets on financial outcomes during the COVID-19 crisis

Corporate social responsibility (CSR) can offer a protective buffer helping firms avoid the worst economic effects in times of crisis. We extend the extant literature by considering whether firm substantive climate commitments are effective at protecting the firm from financial losses during the COVID-19 pandemic. We assess firm financial outcomes through (1) crash and post-crash stock performance and (2) the severity of loss in the COVID-19 stock market crash period. We identify substantive climate commitments as those carbon emission targets aligned with the Science Based Targets initiative (SBTi), which links firm's carbon targets to commitments made under the Paris Agreement. Using a sample of 336 US-based companies, our findings show that science-based targets are positively related to crash-period returns and negatively related to severity of loss. Among firms with science-based targets, only those externally verified and approved by the SBTi are influential in buffering financial losses during a crisis.