Repetto, Robert, and Duncan Austin. Pure Profit: The Financial Implications of Environmental Performance, Washington, D.C.: World Resources Institute, 2000b.

This study is notable because it is among the first to attempt to integrate a social factor (environmental policies) into a standardized equity valuation framework. It estimates the economic impact of environmental risks to 13 major U.S. pulp and paper companies. Using discounted cash flow analysis, the authors estimate the financial impact of future regulation under several different scenarios. Scenarios were developed for both low elasticity (environmental costs can be passed along to customer via higher prices) and high elasticity (costs cannot be passed on) cases. Finds that the net impact of environmental exposure ranges from +2.9% to -10.8% of the firms' market capitalizations (median -6.8%).

Although not tested directly, the authors contend that these findings are not currently reflected in market valuations: "Obtaining the data on which analysis was built involved a great deal of digging in obscure, though public, data sources. In conversations with analysts, research firms providing environmental information to analysts, and with company representatives, we did not find that comparable studies on these environmental issues had been carried out by others. Therefore, we believe it unlikely that findings like these have previously been conveyed to investors."

Also see Austin and Sauer (2002).

This study won the 2000 Moskowitz Prize competition for the best quantitative study of socially responsible investing.