Does Environmental Information Matter To Investors?
Pall Rikhardsson and Claus Holm, The Aarhus School of Business, Denmark
A company is dependent on the flow of funds to finance its activities. In our modern economy a large portion of these funds come from investors who control the flow of funds to the company by decisions regarding what companies to invest in. These decisions are based on information about these companies from e.g. financial reports.

In later years there has been a lot of focus on the environmental impact of business. Information about the environmental performance of the company has also been mentioned as being important input to investor decision making. This has often been used as an argument for demands for increased disclosures of environmental information by business companies. This is based on the assumptions that good environmental performance is actually rewarded and reduces business risks and that investors find this reward improvement/risk reduction significant enough to include it as a decision criteria.

However, given the relative importance attached to environmental information in a number of contexts, there is a distinct lack of empirical evidence that this type of information is actually being used by investors and significantly affects their decision making in the short run as well as the long run.

The research presented in this paper draws on a study carried out in 2003/2004 of the effect of quantitative environmental information on the investment decision behaviour of investors and financial analysts. The research approach employed was based on an experimental setting where groups of investors and financial analysts were given different types of financial accounts. Some of these contained different types of environmental information and some did not. The groups where then asked to base a fictive investment decision on these accounts and the difference between the groups was measured.

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