Published

3 November 2009

Investors Are Willing to Pay More for Environmentally Aware Companies

Mistra’s research program Sustainable Investments will release interesting findings on November 11th. Research indicates that regulation parameters for climate change and emissions affect how investors view their long-term evaluation of companies.

In the study "The Value Relevance of Environmental and Social Performance: Evidence from Swedish SIX 300 Companies" researchers found that the management of emissions, energy efficiency and transparency of environmental policies impact businesses value. The affect is expected to be even greater in the future.

“The hypothesis is that the company's environmental and social performance is a key factor. It can be seen as an indicator of the management's competence or can represent various intangible values, in addition to the company's fundamentals, and thereby affect market value," says Professor Lars G. Hassel, program manager at Mistra´s Sustainable Investments Program.

Innovative "best-in-class" companies that go beyond what the law requires have immediate benefits, according to the study. Investors in the OMXS exchange are willing to pay a premium for the stock share if the company shows good environmental performance.

“It is important for investors to understand that increased regulations and pricing of social costs, especially on the environmental side, probably leads to a stronger impact on market value than we've seen thus far," says Lars G. Hassel.
The study uses a data base that is compiled by GES Investment Services. Companies of all sizes were included.

Mistra Mistra