Friday, October 26, 2012

Environmental Comportment Impacts Stock Valuations

According to a Deloitte report, information about a company's environmental conduct directly impacts its market value. The report from is titled, “Drivers of Long-Term Business Value: Stakeholders, Stats and Strategy.” The research drew on an MIT study of US publicly traded companies from 1980 to 2009. The 30 years of data reviewed in the study showed that stock prices dropped an average of 0.65 percent within a two-day window following the release of negative environmental news.

The risks from bad news appear to be greater than the benefits of good news. As reviewed in the study, investors tended to react more strongly to negative environmental news with the effect getting stronger with each passing decade. While positive news on a company’s environmental behavior produced an average increase of 0.84 percent in the stock price, the study shows that the increased valuations have decreased over time.

The take away from this is that responsible environmental practices may do more to protect against bad press than increased stock valuations from good press. In other words, responsible environmental conduct may be expected while negative environmental actions are punished in the marketplace.

The Deloite study offers clear evidence that shareholders are increasingly interested in environmental performance.

© 2012, Richard Matthews. All rights reserved.

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