FINANCIAL ANALYSTS’ VIEWS OF THE VALUE OF ENVIRONMENTAL INFORMATION

One question of interest to several different groups is whether capital markets value environmental information and, if so, to what extent this information is incorporated into security valuation models. This paper addresses these questions by reporting on a survey of financial analysts and other influential members of the financial community with respect to their knowledge of various types of environmental information and their use of this information in security analysis. The results, while exploratory in nature, indicate a surprising lack of knowledge among the respondents concerning various organizations and reporting initiatives that are well known in environmental circles. A pervasive theme running through the results suggests that while most analysts do not explicitly incorporate environmental variables into their evaluation models, for those that do, their focus is on downside risk rather than upside potential. The results suggest that the reluctance to make widespread use of environmental information is due, at least partly, to concern with the reliability of the available information. This suggests that more work needs to be done to communicate relevant and reliable environmental performance information to the investment community.