Title: Exploring the environmental information in sell-side analysts' research reports

Authors: Henrik Nilsson

Addresses: Department of Accounting and Finance, Umea School of Business, SE-901 87 Umea, Sweden

Abstract: This study shows how environmental information is used by financial analysts when valuing companies. Unlike the previous studies on analysts| perceptions, we use content analysis to examine the actual use of environmental information in valuations. Research reports from large investment banks in the USA and Europe are collected. The sample consists of reports from two industries, oil and chemicals, where the operations have a considerable impact on the environment. The results show that analysts do use environmental information in 35% of the valuations. Most of the information utilised is for environmental expenditures and risk assessment. For instance, the information about environmental provisions and emissions is of relative importance. We also find that analysts use environmental information not only for the evaluations of risk, but also for the assessment of the future upside potential when valuing chemical companies. They make use of this information to motivate the relative valuations.

Keywords: environmental information; financial analysts; equity valuation; content analysis; investment banks; oil industry; chemical industry; environmental impact; environmental expenditure; risk assessment; industrial ecology.

DOI: 10.1504/PIE.2008.019126

Progress in Industrial Ecology, An International Journal, 2008 Vol.5 No.3, pp.213 - 235

Published online: 29 Jun 2008 *

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