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The Economic Value of Corporate Eco†Efficiency

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  • Nadja Guenster
  • Rob Bauer
  • Jeroen Derwall
  • Kees Koedijk

Abstract

This study adds new insights to the long†running corporate environmental†financial performance debate by focusing on the concept of eco†efficiency. Using a new database of eco†efficiency scores, we analyse the relation between eco†efficiency and financial performance from 1997 to 2004. We report that eco†efficiency relates positively to operating performance and market value. Moreover, our results suggest that the market's valuation of environmental performance has been time variant, which may indicate that the market incorporates environmental information with a drift. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time. Our results have implications for company managers, who evidently do not have to overcome a tradeoff between eco†efficiency and financial performance, and for investors, who can exploit environmental information for investment decisions.

Suggested Citation

  • Nadja Guenster & Rob Bauer & Jeroen Derwall & Kees Koedijk, 2011. "The Economic Value of Corporate Eco†Efficiency," European Financial Management, European Financial Management Association, vol. 17(4), pages 679-704, September.
    • Handle: RePEc:bla:eufman:v:17:y:2011:i:4:p:679-704
    DOI: 10.1111/j.1468-036X.2009.00532.x
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