Do Investors Value Environmental Corporate Policies? Evidence from the Australian Market

Mohinesh Chandra and Alireza Tourani-Rad
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Mohinesh Chandra: Department of Turnaround and Restructuring, AlixPartners, New York, NY 10022, USA

JRFM, 2021, vol. 14, issue 3, 1-12

Abstract: In this paper, we explore the relationship between a firm’s environmental policies and their risk-adjusted stock returns, using a sample of stock exchange-listed Australian firms over the period of 2010–2018. We observed a positive and statistically significant relationship suggesting that a firm’s environmental policies partially explain their stock performance. Moreover, we found that investors in the Australian market significantly value a companies’ efforts to reduce emissions, and that this primarily drives the investors’ observed reaction to a firm’s social corporate policies. Next, we formed portfolios and observed that portfolios formed on high environmental, social, and governance (ESG) Environmental Pillar scores consistently outperformed those formed on low-ESG Environmental Pillar scores. Overall, our results lend support to the notion that investors in the Australian market value information about a firm’s social policies.

Keywords: firm performance; environmental policies; ESG scores; SRI (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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