Seeing through the haze: greenwashing and the cost of capital in technology firms

Alexandra Horobet (), Alexandra Smedoiu-Popoviciu (), Robert Oprescu (), Lucian Belascu () and Alma Pentescu ()
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Alexandra Horobet: Bucharest University of Economic Studies
Alexandra Smedoiu-Popoviciu: Bucharest University of Economic Studies
Robert Oprescu: Bucharest University of Economic Studies
Lucian Belascu: “Lucian Blaga” University of Sibiu
Alma Pentescu: “Lucian Blaga” University of Sibiu

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 9, No 55, 21682 pages

Abstract: Abstract This paper investigates the financial impact of corporate sustainability greenwashing in the global Technology sector. Using environmental, social and governance (ESG) controversy data spanning between 2014 and 2021, we examine how media-reported conflicts linking companies to dubious sustainability claims influence financing costs. Models estimate effects on weighted average cost of capital, cost of equity, and cost of debt, contrasting overall controversies around issues against strictly environmental cases. Further analysis discriminates between high and low systematic risk technology firms. Results reveal increased overall sustainability controversies are associated with lower equity financing expenses, indicating investors continue value growth prospects despite ethical concerns. However, strict environmental controversies increase all financing costs. Findings suggest visibility of environmental externalities is sufficiently tangible that greenwashing them backfires financially, unlike shadowy social conduct. Additionally, lower systematic risk firms suffer harsher greenwashing penalties, implying resilience to disruption reduces misleading incentives. Transparency is currently inadequate immunisation against greenwashing in the Technology sector, necessitating oversight reforms. Stricter auditing and disclosure requirements would enable investors to accurately price sustainability risk and channel funds toward authentic sustainability transformation. Moreover, Technology companies must credibly convey environmental progress to avoid value destruction from questionable claims. Accordingly, managers should proactively invest in sustainability to mitigate reputation risks and access financing at lower costs. Ultimately, multifaceted transparency and coordinated policy responses are essential to realize genuine sustainability in disruptive, high-impact technologies.

Keywords: Greenwashing; Cost of capital; Technology; ESG controversies; Dynamic panel modelling (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-024-04817-w

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