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October 13, 2000
World Resources Institute Authors Awarded Moskowitz Prize
Prize-winning WRI economists Robert Repetto and Duncan Austin, authors of "Pure Profit," release
follow-up report today.
SocialFunds.com --
Social investors regularly use the past environmental performance and present policies as a
predictor for environmental performance. But the winners of this year's Moskowitz Prize, the
prestigious award for outstanding research in the field of socially responsible investing, have
provided investors a much more powerful glimpse of future environmental performance.
 Dr. Robert Repetto and Duncan Austin received the
Moskowitz Prize last week at the SRI in the Rockies conference at Snowmass, Colorado, in
recognition of their report, "Pure Profit: the Financial Implications of Environmental
Performance." The authors are Senior Associate and Associate, respectively, of the World Resources
Institute, the Washington-based research organization for global environmental and development
issues that published the report.
"'Pure Profit' ranked high on all three main criteria
for the prize: relevance to social investors, quality and appropriateness of quantitative tools,
and novelty of results," said Lloyd Kurtz, Vice President and Research Analyst at Harris Bretall
Sullivan & Smith and administrator for the Moskowitz Prize. This is the first forward-looking study
of the impact of environmental variables on stock prices. Other studies have generally been
back-tests."
The annual Moskowitz Price was introduced in 1996 by the Social Investment
Forum (SIF), the association of social investment professionals, to encourage and recognize
outstanding quantitative research in the field. Named for Milton Moskowitz, senior editor of
Business and Society Review and co-author of "The 100 Best Companies to Work for in America," the
prize includes a $2,500 award and publication in The Journal of Investing.
In "Pure
Profit," Repetto and Austin suggest that knowing which companies are better positioned to deal with
environmental liabilities and opportunities can lead to better investments. The report applies a
scenario-based approach, identifying uncertainties regarding future environmental policies and
other environmental pressures and assessing the financial exposure of specific companies.
The authors illustrate their method by analyzing the response of 13 leading U.S. pulp and paper
companies to projected future environmental developments, allowing a quantitative comparison of
companies within an industry. Results showed that financial exposure to these environmental issues
vary widely between companies, with one company benefiting while three others faced a probable loss
in market value of at least 10 percent.
"This is a groundbreaking piece that provides a
promising methodology for assessing a company's prospective financial exposure to environmental
risks," said Todd Larsen, communications director for SIF. "The study demonstrates the financial
relevance of environmental issues to mainstream investors and could be used to develop other types
of screening methodologies."
The same authors released a follow-up report today, "Coming
Clean: Corporate Disclosure of Financially Significant Environmental Risks," dealing with the issue
of poor data availability. The new report charges that the lack of disclosure of environmental
risks infringes on Securities and Exchange Commission (SEC) rules designed to protect investors.
In "Coming Clean," Repetto and Austin go on to review the financial statements filed, as
required by the SEC, by pulp and paper companies in 1998 and 1999. Although companies differed in
the thoroughness of their reporting, the study found that few companies adequately disclosed
financial risks or potential competitive impacts arising from their exposures to known
environmental uncertainties.
Repetto and Austin's new study provides powerful confirmation
of the value of their unique model to investors, clearly meriting the recent Moskowitz Prize. The
legacy of their research will hopefully be more concerted efforts by businesses, investors, and the
SEC to improve the state of corporate reporting on environmental risks.
"The authors make
a strong case that, because of low disclosure levels and poor data availability, these impending
environmental liabilities have not yet been factored into the stock prices of pulp and paper
companies," said Kurtz of Harris Bretall. "This raises the broader possibility that, at least in
some issue areas, social research may improve on prevailing market valuations of companies."
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SRI World Group, Inc. All Rights Reserved.
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