Knowing the price, but also the value?

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Financial analysts on social, ethical & environmental information

Knowing the price, but also the value? examines how, and to what extent, mainstream analysts consider social, ethical or environmental (SEE) information important to their work. The study explores this question in light of the increasing importance that extra-financial information, of which SEE is a subset, has taken on in the investment world—and more particularly, the world of socially responsible investors . The market for socially responsible investing is currently still a niche market, but one that has grown steadily over the last decade. However, despite the increased prominence in the use of SEE information by a variety of stakeholders, including some financial analysts, mainstream financial analysts, often remain skeptical at the incorporation of SEE into their financial valuations. Knowing the price, but also the value? looks at the reasons behind meaning of this skepticism, and asks: Does the vocabulary of SEE issues obscure their value to mainstream investors? What precisely is the reason for acceptance or rejection of SEE information in the mainstream analysts’ community?

The study suggests that: 1.) There is little evidence that mainstream analysts are demanding the reporting of SEE information as a category unto itself. 2.) There is no major differences in the way European and American analysts approach social, ethical, governance or environmental issues, with a possible exception for ethics. 3.) The willingness of analysts to use SEE data as a “tiebreaker” in cases where all else is equal, and the assumption that material SEE information is already included in mainstream corporate valuation, suggests that we need further experimental study of the effect. 4.) Because analysts tend to be skeptical about qualitative information that companies provide, businesses should provide as much "hard data" as possible when trying to substantiate their SSE value. 5.) Because analysts often view SSE info as superfluous, we may be facing a semantics problem—they have been trained to be skeptical of non-traditional info. l6.) A positive change may come from mainstream investors who are willing to pay for analysts’ reports that include SEE issues in their analysis.



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