Sustainability or Greenwashing: Evidence from the Asset Market for Industrial Pollution
Speaker(s)
Discussant(s)
Sustainability or Greenwashing: Evidence from the Asset Market for Industrial Pollution
Authors:
Ran Duchin
Boston College - Carroll School of Management
Janet Gao
McDonough School of Business
Qiping Xu
University of Illinois Urbana Champaign
Abstract
This paper provides novel evidence on the role of pollution in the divestitures of industrial plants. We find that firms divest pollutive plants following scrutinized environmental risk incidents. Following these divestitures, however, total pollution levels at the sold plants do not decline, and per-employee pollution levels increase. Furthermore, the sellers do not fully lose access to these plants, since they are sold to firms with supply chain relationships or joint ventures with the sellers. The sellers, however, earn higher environmental, social, and governance (ESG) ratings, reduce their regulatory compliance costs, and improve their access to government resources. Overall, the evidence suggests that the asset market allows firms to redraw their boundaries in a manner perceived as environmentally friendly without real consequences for pollution levels or production processes.