The Risks and Returns of “Greenwashing”

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Risk".

Deadline for manuscript submissions: 31 May 2025 | Viewed by 3797

Special Issue Editor


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Guest Editor
Department of Economics and Finance, East Tennessee State University, Johnson City, TN, USA
Interests: international finance; corporate finance; risk; climate finance; sustainable finance

Special Issue Information

Dear Colleagues,

The study of the effects of greenwashing, where firms "advertise" that they follow better environmental, social, and corporate governance policies than they in fact enact, on the financial aspects of firms is a relatively new and exciting field of finance. When studying this field, the dearth of examination of the financial outcomes of greenwashing and the financial factors that can make greenwashing a rational decision by the corporation is striking. While researchers such as Baldi, Pandimiglio (2022), De Silva Lokuwaduge, and De Silva (2022) and Gregory (2023) have made some initial attempts at determining the returns and risks of greenwashing as a corporate strategy, much remains to be examined. This Special Issue of JRFM is an attempt to bring together recent research in the area of finance and risk management on greenwashing as a corporate strategy.

This Special Issue is aimed at reconciling the dynamic high prices that firms and their managers often pay in being found to be conducting greenwashing and the fact that many surveys show that greenwashing is a very common corporate strategy. We seek contributions on novel approaches to the following questions: What are the risks of a greenwashing strategy? What are the risks of different types of greenwashing strategies? How do the risks of greenwashing vary over country and industry? What financial factors increase or decrease the risk of being found out?

We encourage possibly controversial papers, both theoretical and empirical.

References

  • Baldi, Francesco, and Alessandro Pandimiglio.(2022). The role of ESG scoring and greenwashing risk in explaining the yields of green bonds: A conceptual framework and an econometric analysis. Global Finance Journal, 52, 100711.
  • De Silva Lokuwaduge, Chitra S., and Keshara M. De Silva. (2022). ESG risk disclosure and the risk of green washing. Australasian Accounting, Business and Finance Journal, 16(1), 146-159.
  • Gregory, Richard Paul. (2023). When is greenwashing an easy fix?. Journal of Sustainable Finance & Investment, 13(2), 919-942.

Prof. Dr. Richard P. Gregory
Guest Editor

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Keywords

  • risk
  • return
  • finance
  • greenwashing
  • ESG
  • sustainability
  • risk management

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Published Papers (1 paper)

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Research

30 pages, 421 KiB  
Article
How Greenwashing Affects Firm Risk: An International Perspective
by Richard Paul Gregory
J. Risk Financial Manag. 2024, 17(11), 526; https://doi.org/10.3390/jrfm17110526 - 20 Nov 2024
Cited by 2 | Viewed by 3321
Abstract
The effects of greenwashing as a corporate strategy on firm risk are not well defined. I construct a greenwashing measure for 3973 companies from 70 countries from 2012 to 2022. Using Dynamic Panel Modeling, I find results suggesting that greenwashing is a complex [...] Read more.
The effects of greenwashing as a corporate strategy on firm risk are not well defined. I construct a greenwashing measure for 3973 companies from 70 countries from 2012 to 2022. Using Dynamic Panel Modeling, I find results suggesting that greenwashing is a complex phenomenon with both positive and negative consequences. While it can improve a firm’s public image and potentially enhance its financial performance, it may also lead to increased risk and misallocation of resources. Greenwashing firms have a lower weighted average cost of capital due to a higher debt-to-capital ratio. They are larger, have higher institutional ownership, and lower dividend yields. On the other hand, greenwashing firms have more ESG-related controversies that can hurt firm revenues and market value, they have higher unsystematic risk, and they have lower dividend yields and return on equity. I also find evidence that there is a feedback relationship between ESG ratings and greenwashing. There is no evidence that government mandates on ESG reporting inhibit greenwashing. The implication is that ESG scoring that emphasizes reporting ESG activities while informing investors also encourages greenwashing. Full article
(This article belongs to the Special Issue The Risks and Returns of “Greenwashing”)
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