Purpose This paper aims to examine the connection between financial reporting standards and climate-mitigation pathways mediated by capital investment decisions, studying how accounting rules can affect firms’ greenhouse gas (GHG) emission intensity through their effect on real capital expenditure. Design/methodology/approach This study analyses a panel of 2,723 listed EU companies over the period 1989–2024 (45,965 firm-years), including 468 firms reporting GHG emissions between 2002 and 2024. This study uses fixed-effects regressions to test the effect of investment on emissions, and System-GMM, matching, entropy balancing and a Heckman selection model as robustness checks. Findings The results show that previous-year CAPEX is associated with a reduction in GHG intensity, while International Financial Reporting Standards (IFRS) adoption reduces firms’ investment sensitivity to opportunities. Conservative estimates indicate that IFRS firms experienced about 1.5% lower annual reductions in GHG intensity relative to DGAAP counterfactuals, implying a cumulative gap of roughly 7% (∼402Mt CO2e) over 2015–2023. Research limitations/implications This study focuses on investments broadly defined, which have nonetheless been shown to contribute to emissions reduction. As soon as sufficiently granular data become available, future research will be able to focus specifically on green investments (e.g. aligned with the EU Taxonomy or other criteria). Practical implications This study highlights the relevance of accounting rules for climate outcomes. Accounting standards affect not only investor information but also managers’ real-economy decisions, with direct consequences for emissions. These effects have important implications for climate targets, competitiveness and environmental justice. Originality/value To the best of the authors’ knowledge, this is the first firm-level study to link accounting standards to climate-mitigation outcomes through the investment channel, thereby bridging accounting research with climate economics and macro-financial analysis.
Haldane et al. (Thu,) studied this question.