Go on green
Investors often say environmental disclosure plays a small role in their decision making. According to Danish researchers, however, they are greener than they think.
In a controlled experiment, investors were asked to assess the relative importance of various sources of information. They rated environmental disclosure below other factors like revenue and currency risk, but their investment decisions belied their stated bias.
‘The traditional view on environmental information is that investors will react only if it represents potential risk to the cash flow of the investments,’ says study co-author Claus Holm, head of the accounting research group at the Aarhus School of Business. ‘But we have found positive environmental information disclosure also significantly influences investment allocation decisions.’
Holm believes firms should consider targeting investors with more of the same environmental information used to communicate with other stakeholders.
