Department of Banking and Financial Management University of Piraeus
Academic Seminar Series
Thursday, March 20th, 2025 / Time: 16:15 – 17:30, Online

Can Investors Curb Greenwashing?

Olivier David Zerbib
CREST, ENSAE, Institut Polytechnique de Paris

Abstract

We show how investors with pro-environmental preferences and who penalize revelations of past environmental controversies impact corporate greenwashing practices. Through a dynamic equilibrium model, we characterize firms’ optimal environmental communication, green investments, and greenwashing policies, and we explain the forces driving them. Notably, under a condition that we explicitly characterize, companies greenwash to inflate their environmental score above their fundamental environmental value, with an effort and impact increasing with investors’ pro-environmental preferences. However, investment decisions that penalize greenwashing, policies increasing transparency, and environment-related technological innovation contribute to mitigating corporate greenwashing. We provide empirical support for our results.

Olivier David Zerbib is a researcher at Center for Research in Economics and Statistics (CREST) and an Assistant Professor at ENSAE, Institut Polytechnique de Paris. His research focuses on asset pricing in the presence of sustainable investors and on how the latter can push companies to reduce their environmental footprint. His work has been published in journals like Management Science, Journal of Financial Econometrics, Review of Finance and Journal of Banking and Finance. He holds a PhD from Tilburg University and a Master in Economics from Paris School of Economics. More information is available at https://sites.google.com/view/odzerbib.

This seminar will be online on Teams. Click here to attend