195 – Sustainability reporting and environmentally sustainable investment

Leonardo Becchetti*, University of Rome Tor Vergata , Department of Economics and Finance

Sara Mancini, University of Rome Tor Vergata , Department of Economics and Finance

Nazaria Solferino, University of Calabria,Department of Economics, Statistica and Finance

 

Abstract

We investigate the effects of the introduction of sustainability reporting (SR) on investment related to corporate social responsibility (CESI).  We focus on environmental sustainability by using as exogenous treatment the Italian implementation of the EU Directive 2014/95 that has made SR mandatory for companies with 500 employees and above, conditional to complementary net sales or total assets thresholds.

We estimate the causal effect using data from the ISTAT Multiscopo Survey (including the universe of middle and large sized Italian companies) with a fuzzy discontinuity design approach and find evidence of a sharp discontinuity around the cutoff. These findings show that mandatory SR is associated to significant positive effects on CSR investments in crucial environmental domains (waste management, recycle/reused material in inputs, pollution control, emission reduction).

Their magnitude implies an increase of 20 to 30 percent of companies involved in CSR investments in general and, specifically, in all the considered types of environmentally sustainable investment. Policy implications of our findings are that the observed findings could be a reference for the effects of the introduction of similar rules in other countries. Our results can as well be considered a lower bound for the impact of the recent reduction of the mandatory SR threshold (250 employees) and the introduction of more stringent accounting standards in the European Union.

 

KEYWORDS

Corporate Social Responsibility, non-financial reporting, environmental sustainability.

JEL CLASSIFICATION

D25 Intertemporal Firm Choice: Investment, Capacity, and Financing; D22 Firm Behavior: Empirical Analysis

 

 

Corresponding author: becchetti@economia.uniroma2.it