Green Recovery: How Are Environmental Stocks Doing?

Abstract

With a focus on 310 “green” companies, in the industries of biomass, biofuels, clean tech indexes, efficiency, energy storage, fuel cells, geothermal, recycling, green chemicals, environmental building, renewable energy project developers, solar energy, environmentally conscious transportation, and water and wind energy, this article tests the hypothesis that green companies’ financial performance follows that of traditional companies. It also examines how different countries excel at developing environmental solutions in different areas and illuminates the reasons for their successes. Such reasons might include government investment or tax incentives. Finally, this article analyzes how different industries have been performing over time. Key variables investigated include differences in capital expenditures, such as research and development and the sources of firms’ financing. Findings suggest that Nasdaq firms outperform the green firms, although certain green industries dominate the Nasdaq. Other significant results relate to larger equity shares held by insiders in environmental firms. Finally, green firms have larger R&D and capital expenditures compared and better corporate governance than Nasdaq firms.

TOPICS: ESG investing, performance measurement