Does it pay to be environmentally responsible? Investigating the effect on the weighted average cost of capital. (14th June 2021)

• Record Type: Journal Article
• Authors: Mariani, Massimo; Pizzutilo, Fabio; Caragnano, Alessandra; Zito, Marianna
• Is Part Of: Corporate social responsibility and environmental management. Volume 28:Number 6(2021)
• Page Start: 1854
• Page End: 1869
• Publication Date: 2021-06-14
• Subjects: climate change -- environmental commitment -- environmental policy -- environmental risk -- European market -- sustainable development -- weighted average cost of capital; Environmental management -- Periodicals; Environmental auditing -- Periodicals; 658.408
• DOI: 10.1002/csr.2164
• Languages: English
• ISSNs: 1535-3958

Abstract

Abstract: This research aims at investigating the effect of firms' environmental policies on the weighted average cost of capital (WACC) in order to catch capital markets' reaction towards corporate environmental commitment and effectiveness in reducing carbon emissions. We refer to the European market and analysed a sample of companies listed on the Stoxx Europe 600 Index during the timeframe 2014–2018. Our results show that capital markets have become particularly sensitive to environmental issues and therefore reward environmentally virtuous firms with a lower after tax WACC. We also argue that this effect is prominent for both high emitting and low emitting industries.