ENVIRONMENTAL-INFLUENCES ON COMPANY VALUATIONS

The benefits accruing from good environmental management of companies are most often linked to economic benefit and the concept of moving to wards sustainable development. However, the link between environmental liabilities, assets, or performance, and the financial valuation of a company remains obscure at best. Operational improvements, for exampl e from implementing a waste minimization programme, can give a clear s hort-term reduction in costs, and impact immediately on profits. Many environmental risk management programmes also need to deal with long-t erm issues such as historical land contamination and changes in manufa cturing technology. These have a much more protracted and ultimately f undamental impact on the perceived capital value and future prospects of a company. This paper seeks to describe how the relationship betwee n environmental and financial risk management is becoming clearer, and uses examples to show how this is brought into focus during merger an d acquisition activities.