A new study by the University of Sussex Business School and the University of London Birkbeck shows that for investors, the stocks of environmental companies are better than the stocks of their polluting competitors.
Research by Dr. Panagiotis Tzouvanas and Professor Emmanouil Mamatzakis found that companies with better than average environmental performance provide investors with higher returns and lower risks than their competitors.
The study found that, on average, the annual return of a portfolio with the best-performing environmental stocks may be 7% higher than that of a portfolio with high-polluting stocks, while the risk of environmental stocks is about 30% lower.
risk
In 2005, an investor invested $100 in a green company whose environmental performance was 10% higher than the industry standard each year. Compared with investing in a polluting company whose environmental performance was 10% below the industry standard, their return on investment in 2018 It will increase by approximately $45. The study author explained that the industry average.
The authors of the study stated that their findings indicate that investment in environmental stocks will improve the efficiency of financial markets and provide strong reasons for investors to choose environmental stocks in a typical minimal-variance portfolio analysis.
They also pointed out that this research provides further reasons for seeking policies to reduce greenhouse gas (GHG) emissions by not only preventing environmental degradation but also improving global market performance.
Dr. Panagiotis Tzouvanas, lecturer in finance at the University of Sussex School of Business, said: “Our research shows that investing in environmental stocks is worthwhile, and from the perspective of portfolio selection, it is reasonable. The research also shows that to a certain extent Above, the company’s investment in clean technology is profitable.
“Our research results show that stocks with outstanding environmental performance have higher equity valuations and benefit from lower associated risks, especially lower special risks. We found strong evidence that returns and risks in the market On the one hand, it is reasonable to choose a portfolio of companies with good environmental performance.
Clean technology
“Our findings on the relationship between environmental risks and the stock of systemic risks have given investors a warning, but in terms of adapting to the challenges of clean technology, the connection is well-founded.”
This study is the first of its kind to study the relationship between a company’s environmental performance and its risk-adjusted returns.
The author uses the performance data of S&P 500 companies from 2005 to 2018 to compare the market returns and risks of environmental and non-environmental company stocks. If a company’s greenhouse gas emissions are lower than its average level, it is considered an environmental company. Competitors.
