INFORMATION SUPPLY CHAIN PERSPECTIVES ON THE MATERIALITY OF ENVIRONMENTAL NARRATIVES

David Campbell Newcastle University, England Richard Slack Newcastle Business School Northumbria University

INFORMATION SUPPLY CHAIN PERSPECTIVES ON THE MATERIALITY OF ENVIRONMENTAL NARRATIVES

Abstract This paper examines user perspectives on environmental narratives in annual reports and in analysts reports, these representing two important stages in the information supply chain between reporter and investor. In particular, it interrogates the perspectives of the research sell-side and buy-side, and notes perceptual differences and similarities with regard to materiality assumptions. To draw meaningful observations and discussion a single sector was chosen for the research, namely the UK banking sector. The sample comprised 19 sell-side banking analysts and a number of buy-side (fund manager) participants, all based in the UK. Through the use of semi-structured interviews, views on the user materiality of environmental narratives were collected. Findings include the observation of a near total dismissal of potential materiality by the sell side for annual report narratives yet a demand for contextualised environmental impact information from the buy side. Reasons for the discordance are examined in the context of user needs analysis and evidence is offered on buy side-driven changes in the potential materiality of environmental narratives.

The value of present environmental disclosures is unclear (Rockness, 1985: 350)

Introduction
There is a substantial literature on environmental disclosure with most of it referring to environmental narrative in companies annual reports. Since the early social and environmental capture studies of Ernst & Ernst in the 1970s, both methods of analysis and theorisation have become increasingly elaborate. The literature comprises a number of identifiable genres of work with empirical and theoretical contributions comprising the majority of this. A smaller number have sought to address issues of information usage and materiality and it is to this latter genre that this study aims to contribute. It is perhaps a sign of the perceived marginality, to some information consumers, of environmental disclosure that one analyst interviewed in this study referred to it, seemingly mockingly, as the swampy stuff. Prior studies have challenged the view that environmental disclosures might be investment material (Milne & Chan, 1999) whilst recent work by Thompson & Cowton (2004) suggested that banks are, in actuality, structurally exposed to environment risk owing to their facilitation of environmentally damaging activity by the allocation of loan capital. This, it was argued, extends the environmental accountability of banks, making them potentially more, rather than less, environmentally sensitive than some other sectors as hitherto presumed. It is this complicity that represents a challenge to existing models that assume environmental exposure to be of marginal importance to the finance sector in general and banks in particular. Additionally, banks do have a direct environmental impact, for instance energy consumption by branches and call centres and the erection of new build to manage international expansion. The paper seeks to gain views on environmental narratives at different stages in the information supply chain, to interrogate any perceptual similarities and differences, and in so doing, to make a contribution in terms of how environmental reporting is actually used by a range of capital market participants (rather than, perhaps, how researchers assume that it is used). The remainder of this paper is set out as follows. In the next section, the prior work on banks and environmental activity is reviewed and this is followed by a broader discussion of the materiality of environmental narrative in corporate reports. Method is briefly described and findings are presented in the form of verbatim quotations from both sell side and buy side participants. Finally a discussion is entered into that challenged the bases of the models upon which sell-side analysts assumptions of materiality are based.

Prior work and literature

Banks and environmental exposure Some prior studies in environmental disclosure have sorted samples according to the perceived environmental sensitivity of the sector or company selected (Wilmshurst & Frost, 2000; Campbell, 2003). Studies of that type typically posited that those most

sensitive to environmental risk and/or exposure would be the most likely to make disclosures. Broadly speaking, hypotheses of that type have been supported with some other studies (e.g. Patten, 1992) focussing specifically on environmental disclosure in a highly exposed industry of which oil & gas, chemicals, forestry, pulp and paper are the most often cited. Inasmuch as some industries were identified as being more environmentally sensitive, others, by default, were identified as less so. Such selection was usually made on the grounds that they were less likely to be associated with pollution or high levels of resource consumption or emissions. Retailers, banks and other financial institutions have been among those identified as less environmentally sensitive for the purposes of such comparisons. Uniquely, however, it has been argued that banks have a specific environmental footprint not immediately obvious given the ostensibly clean nature of their normal operations. This is because, through their capacity to grant or withhold loans, they, can be seen as facilitators of industrial activity which causes environmental damage. (Thompson & Cowton, 2004: 199). This argument can be extended to the facilitation of socially unacceptable business activity also, but this paper will restrict itself to environmental issues lest it become unfocussed in its later discussion. Thompson & Cowton (2004) identified three types of environmental risk that might impact upon a bank. Direct environmental risk is that arising from liability for the remediation of environmental damage to property it has obtained, perhaps by a loan default or similar. Indirect exposure, which Thompson & Cowton suggested was the most common, arises when a company holding loan capital from the lending bank goes out of business as a result of its own environmental risk, perhaps arising from a lawsuit or the costs of implementing a new environmental standard or similar. The difference, as far as the bank is concerned, between direct and indirect exposure is one of the limits of liability. For direct risk, the potential liability may be greater than the initial loan amount for indirect risk, the liability is limited to the amount already lent. A third category of risk linked to the environment is more difficult to measure but perhaps the most important that of derived reputational risk (Buxton, 1997). Although not directly linked to environmental matters per se (more to social issues), damage to reputation risk was witnessed to Barclays Bank in the 1980s as a result of its activities in the (then) apartheid-supporting Republic of South Africa. Similarly, Campbell & Beck (2004) showed potential reputational damage to Deutsche Bank when its role in the financing of Nazi concentration camps was uncovered. Banks therefore, as capital providers, have the ability to grant or withhold loans in the same way that funds have the ability to select stock on the basis of a number of business risk or ethical filters. If a loan proposal, say to a business in the UK or abroad, is scrutinised using an inadequate environmental risk filter it would, when repeated many times, increase the lenders exposure to environmental risk, be it direct, indirect or reputational in nature. It is therefore possible to conceive of a situation in which the environmental narrative in a banks annual report and elsewhere in other media, would be potentially material to those seeking to model and forecast the banks future earnings in

the same way that it would be for an oil company. The premise contained in this argument formed the basis of the research question examined in this paper. Questions of materiality The presence of voluntary environmental disclosures in corporate communications has precipitated a substantial literature. A number of (albeit overlapping) genres of paper can be discerned in this literature. The first of these, descriptive studies, have analysed patterns and trends in disclosures, reporting, for example on sector effects, patterns over time and longitudinal effects (Adams, Hill & Roberts 1998; Adams & Harte, 1998; Unerman, 2000; Guthrie & Parker, 1989; Campbell, Craven & Shrives, 2003). A second tranche has attempted to theorise such disclosures and considered, with varying degrees of success, the causes and effects of voluntary reporting (for example Deegan & Rankin, 1996, 1997; Wilmshurst & Frost, 2000). Thirdly, some papers have focused on the decision-usefulness of observed disclosures (Belkaoui 1980; Benjamin & Stanga 1977; Chenall & Juchau 1977; Aupperle 1984; Holman et al 1985; Ingram 1978; Shane & Spicer 1983; Spicer 1978; Naser & Nuseibeh, 2003). Rather than observing or theorizing voluntary narratives, these papers have attempted to explore the usefulness of voluntary disclosures to selected actual or potential users of business communications. Most of the theories that have sought to explain the presence and variability of environmental disclosures have focussed on legitimacy-based assumptions (they are there to manage a range of legitimacy threats in the wider societal sphere). The notion that they may have any information value to investors has hitherto been less examined. Excepting the role of environmental disclosure to ethically filtered funds the only conceivable investment-material uses of environmental disclosures are as part of the organisations risk management or as a means of competitive advantage. These factors, in turn, may concern actual or potential environmental liability, or reputation risk. Milne & Chan (1999) examined the materiality of social and environmental narratives to investment analysts using a questionnaire-based instrument. Following studies by Benjamin & Stanga (1977), Teoh and Shui (1990) and Deegan & Rankin (1997), Milne & Chan (1999) found that bankers and investment analysts seem to be the most likely to state that social or environmental information has little or no importance for them. They concluded that, much of the survey evidence, especially that of financially trained investor groups, suggests that social disclosures have no effect [on investment decisions]. (Milne & Chan, 1999: 443) This study sought to address the potential materiality of environmental disclosures by interviewing sell-side and buy side participants directly to ascertain the nuances of their views in a way not possible using non-interview method. In particular, however, it sought to use the example of the banking sector as one in which environmental risk might not be immediately obvious but can nevertheless be argued to exist and be, perhaps, substantial.

Method

Given that a number of audiences for corporate reporting in general and environmental reporting in particular have been identified (Tilt, 1994), it was necessary to identify constituencies capable of identifying and discussing the usefulness of environmental reporting in a banking context. In terms of investment in banks, it is generally the role of sell-side analysts to research, forecast and report on the prospects of a given sector or stock and then to sell this to buy side participants (such as fund managers) who then use this information to make investment decisions and the advise clients. In combination, it is upon the actions of these two constituencies that the majority of asset allocations are made and so it is their perspectives that are most valuable in seeking to establish the usefulness and materiality of environmental narratives. Sell-side analysts were an obvious choice given their role on the information sell-side as providers of research upon which earnings forecasts are made and investment decisions are taken. Nineteen City of London banking sector analysts were interviewed and only retail bank analysts were invited to participate owing to the focus of the research being on the unique role of banks in environmental damage facilitation. On the buy side, interlocutors were selected on the basis of whether they advised clients on, inter alia, banking stocks and banks. In practice, this is the majority of fund managers. The interlocutors were each contacted by telephone, informed of the nature of the project, invited to participate by being interviewed and then, over the course of 15 months, individually interviewed for the research. All meetings were tape recorded and transcribed. Anonymity was offered in exchange for the understanding that each would speak freely on the subject. This was accepted in each case. A note on sell-side and buy-side The sell-side analysts role is primarily to research and report on the strategies of, and prospects for, individual company stocks. It is thought that analysts assume an important role in the institutional establishment of capital markets owing to their expertise and influence. Day (1986: 295) referred to analysts as, perhaps the most informed and articulate user group. Fogarty & Rogers (2005: 331) commented that, financial analysts employed by securities firms play an important role in the capital markets. Most importantly, the reports that they produce are given great consequence by many market participants. It is well established, however, that analysts gain intelligence on the companies they analyse from a number of sources. These include the companies analysts briefings, interim reports, annual reports, press comment and direct conversations with companies investor relations departments. Direct contact with companies senior management (typically at FD/CFO level) is usually (the authors were informed) to seek clarification of previous disclosure and not to obtain any new marketsensitive information. Prior research on the behaviour of analysts contains those studies that have employed proxies for analysts (e.g. Larcker & Lessig, 1983; Bouwman, 1984) and those that have engaged with analysts themselves (e.g. Biggs, 1984; Day, 1986). Of those that have contacted analysts directly, some have done so by the use of questionnaires and similar (Milne & Chan, 1999) whilst others have interviewed face to face.

It is the fact that analysts used a number of information sources in addition to the annual report that makes any discussion of annual report (only) disclosures necessarily limited in scope. Analysts may well be able to claim that while they may in principle be concerned with environmental risk, the nature of annual report environmental disclosure is such that it, specifically, need not be material to them. This is only partly borne out in practice, as the discussion of findings will illustrate. The general assumption that banks were not significantly exposed to any environmental risks was made by all of the analysts interviewed. The buy-side, whilst operating in the same general industry, are downstream of the sellside in terms of information. Whereas sell-side people are likely to be analytical, numerate and deal with primary data sources, the buy-side, which comprises wealth and fund managers, have a different type of information appetite. It is the buy-sides responsibility to meet the needs and expectations of their clients, who are, in various guises, investors. Whilst institutional clients are often likely to assume yields to be the principle metric of success. Other end users of investment products may have more complex assumptions. The buy-side acts on a number of sources of information and guidance in deciding on asset allocations including press journalism, agreed buy lists and, of course, analysts reports. Buy side actors will tend to use these sources rather than original annual reports themselves and so the manner in which the material content of sell-side sources is interpreted and communicated is very important.

Findings
The findings in this paper comprise verbatim quotations from buy-side and sell-side. In both situations, discussion was centred on the materiality of environmental narratives to banks. For the sell-side, the discussion was on environmental narrative in their sources (mainly annual reports) whilst for the buy-side, it was more appropriate to discuss materiality in the context of analysts reports Sell-side perspectives The overall sell-side view on environmental issues in general for banks ranged between the dismissive and the cynical. None of the interlocutors believed that environmental narratives in banks annual reports were presently material to investment and there was little evidence of belief that (for banks) environmental issues could ever be. The first noteworthy finding was that the environmental narratives contained in banks annual reports were rarely read at all by analysts. The quotes in Exhibit 1 are typical of the cohort. Whilst an analysts attention to an annual report begins with the financial information (as it is upon those that forecasts are based), the use of narrative information tends to be limited to the identification of any factors that might affect the forecasting. Hence, strategy disclosure is likely to be material in some cases but most other categories less so.

Analyst No. A1 A2

A3 A4 A7 A8

Evidence I never really look at [environmental disclosure] Interviewer: Are you interested in [environmental disclosure] at all? Not really, no. Interviewer: How would you deal with environmental disclosure? Frankly Id ignore it really. As I say banks, although they do have a part in the social fabric and so on for what Im trying to do its not that relevant really. Interviewer: Would you read it? Perhaps glance at it would probably be the right phrase. [Would I read] the CSR stuff? Not really. Environmental blah blah blah. Its a bank. Interviewer: Social and environmental report? Absolutely useless from my point of view. Corporate and social responsibility report? Forget it. Just forget it. Interviewer: [Is environmental disclosure] totally useless to you? Yes terribly irrelevant

Exhibit 1. Selected and representative sell-side views of environmental section of annual report. The proposition that environmental disclosure, because of possible environmental risks, might be material in banks annual reports, was generally dismissed. It was considered potentially material to ethical funds that applied an environmental filter but otherwise was considered highly immaterial. It is perhaps curious that whilst end user needs were considered in the case of ethical funds, there is no evidence that sell-side analysts believed their normal information users (the buy-side) to require information narrative (gleaned from the annual report and other sources) to be a part of their own analysts reports. Exhibit 2 sets out selected quote to illustrate the general beliefs expressed.
Analyst No. A1 Evidence Interviewer: [Given what you said earlier] could you ever envisage a situation where social and environmental disclosure would actually be material to you in dealing with a bank? Only if youre running that type of [ethical] fund or for us, I guess if were advising clients as to what banks [meet the clients environmental criteria] . Otherwise, no, not really. You could get to the stage where suddenly the whole market changes to that way of thinking but[otherwise not]. Interviewer: So which is the most immaterial part of the annual report as far as youre concerned. If we could rip some pages out, what would be completely useless to you? Id say pretty high up the list would be for me as an analyst and I appreciate its only the view of an analyst and its not only analysts who read these documents for me as an analyst it would probably be the environmental report. Interviewer: So looking at the front end of those annual reports, which sections or how much of that is really of no use to you? Corporate social [disclosure is] definitely no use. Interviewer: So [given what you said earlier] in terms of your work as an analyst you would judge the CSR [including environmental] component of that as being, what, less than material? [I would view it as being] not material at all. There might be analysts out there who sit and read this from cover to cover but is there anything in here material thats going to affect the share price? No. Interviewer: So if that [environmental disclosure] wasnt there, would you miss it?

A3

A4 A5

A6

A8

No. Obviously you know that the accounts are designed to satisfy several different groups of investors. Were obviously only just one and as equity analysts youre after profits. A lot is about profits. A lot is about cash flow and the balance sheet. A lot less is about this sort of stuff - whereas this sort of stuff is going to be very important to other readers of the accounts. I say that as someone who is writing a report right now for socially responsible investors but I dont think that corporate social responsibility has any bearing on socially responsible investor issues because its all about how much paper well Im guessing because I havent read one but Im guessing its all about how much paper theyve used and all this kind of stuff. Terribly irrelevant. I think from the end perspective its a waste of money to be printing a lot of this and also I suppose theres a kind of irony in printing an environmental report that nobody reads.

Exhibit 2. Selected and representative sell-side views on materiality of environmental narratives to stock asset allocations.

There was a general dismissal of any notion that environmental risks arising from a banks loan book would be material to the stock value (Exhibit 3). Exhibit 4 contains selected sell-side views on the actual or intended readerships or audiences for annual report environmental narratives.
A6 Interviewer: [Could you comment on the idea] that banks in fact do have some environmental accountability because they are able to choose between different investment [proposals] some of which might be more environmentally benign than others. I think these guys are bankers not some sort of environmental guardians. That is probably something thats far better controlled by other parties, say central government taxing people who pollute the atmosphere I mean thats not the worst idea in the world. I think it would be harsh of banks to try and work it out because when I think about investing in a bank Im thinking about how its going to create money using my money, going through the usual banking processes. arguably [banks] have got quite a big impact potentially environmental risk because they might lend to people who then pollute and so forth so they might be complicit in pollution by their lending decisions or they might inherit something as part of a bad debt which might have environmental liabilities attached to it. Would you ever consider that? No. Straightforward answer. No.

A9

Exhibit 3. Views on banks environmental impacts through loan activity.

There are funds out there that are starting to have socially responsible investing and if I get rung up and asked a question Id go off and get the book and have a look at it but its not for the majority of the clients I talk to they invest to make money. I think there are some parties interested in it. I imagine when the idea first came up it was to try and nudge corporate UK into being better socially responsible citizens. That is probably a sensible trend but Im not sure that putting a few pages in an annual report really makes a big difference. Interviewer: So you wouldnt read [the environmental disclosure]? Youve got to remember my job description if Ive got one anywhere is to effectively create value for my clients and so I think about what my clients want. The vast majority of my clients want share

prices that are going to go up and Im pretty sure that in banking there is no prospect in the near future that their environmental outlook will have any effect on their share price. Interviewer: So for a bank, could you ever see a situation where an environmental disclosure would ever be material disclosure for you as an analyst? Yes I could. It would purely be if it was driven by my clients. Interviewer: If your clients were [concerned with banks environmental performance]? Yes. If we end up with a huge socially responsible investment community that dominates the landscape as opposed to at the moment [where] people like you and I invest in our pensions wanting to have a safe retirement. It may be nice to think about the environment a bit on the side but I dont like to inlay that decision into my pension pot. Interviewer: In relation to environmental, could you envisage a situation where CSR and environmental disclosure would be very valuable to you? I think yes, there are a few situations. One I mentioned is the emergence of SRI type funds and if they became [prominent] if the clients say that they want to run socially responsible funds then we have to react to that, and its their decision to make and if there was a big drive into socially responsible funds then it would become an increasingly important component of the accounts and what the banks are doing. Interviewer: But as things currently stand it would take a paradigmatic shift of the whole sector for that to [happen]? Yes, but then something might happen that actually has an impact, not through that but through, I dont know, its hard to envisage precisely what it might be, but there might be a sudden surge of [environmental concern]. Its hard to envisage what precisely might happen at the banks but of course these things do happen from time to time and then in that context we would look at it a little bit more closely. But on balance its difficult to see that happening. Over the next five years I would be surprised if I was looking at huge amounts of [additional] detail in those statements. If the clients funds arent socially responsible then this sort of stuff is obviously somewhat less relevant from that point of view. [The] corporate social responsibility report [including the environmental disclosure] doesnt really have a great deal of impact. I guess that there could well be a stage where, for whatever reason, some sort of action group or some sort of large provisional fine could be levied on this [company] or other banks, in which case we will all go and have a look at this [disclosure] but it doesnt automatically give us very much of interest.

Exhibit 4. Selected and representative sell-side views on audiences for environmental section of annual report. Buy side perspectives Interviews with buy side participants highlighted the importance invested by them in sell side analysts reports. It was typical to spend some time each day reading analysts reports of a given sector or company with one interlocutor volunteering that he might spend half an hour a day reading them (on an online subscription platform). As a cohort, buy side actors seemed to be more persuadable of the possibility than environmental factors could be material to bank stock investment decisions. This was principally because of the diversity of their own clients opinions on environmental issues. According to one wealth manager, the green issue could potentially be something that the end user is asking about. The differences in role between the two sides was highlighted by one buy-side actor: The sell-side analyst isnt there to buy

stock for his client like we are. Buy-side actors believe themselves to need to be nearer to public opinion on a range of issues including environmental concern because clients will sometimes ask for investment advice based in part on environmental performance. Because the buy-side professionally interacts with the public in a way that the sell side does not, actors they believe themselves to be more sensitive to a wider range of potential concerns. It was suggested that attention to a range of wider issues by analysts, including environmental issues, could be one of the factors that might increase their value as researchers to the buy-side. Exhibit 5 includes buy-side opinions expressed on the materiality of environmental issues to investing in banks.
Its not just about climate change, investing some of your money in the local communities and helping out charities. Somebody [an analyst] teasing that out and putting that into an analysts report might just help us follow that researcher [analyst] a bit more because we do get asked those questions [by our clients]. If theres a general understanding in the wider community that something needs to be done then the green issue is going to become much greater so we [buy side] need to be on top of that. We have a small proportion of our client base who are interested in being green and that could grow significantly. I think the green thing will become more and more important. Companies are increasingly making statements about their carbon footprint I think that sort of thing will become a regular thing in analysts reports in the future. Interviewer: Where do you think sell side analysts get their social and environmental information from? I would have thought almost exclusively from the company report or any press statements that the companies are putting out. Its coming in now though. Interviewer: Could the information on the environment in analysts reports be helpful to you? Yes. For people [clients] with green views, it could change the four, three, two, one ranking [of banks attractiveness as buys]. So it could be material to which investment you make? It could be for certain people. And for non-green investors? One thing were being asked to look for in the asset allocation process is, Just keep you eye on the green issue. As peoples perception of the green issue builds more people will become that green investor If in a report [by a sell side analyst] they started to show, for example, that one bank was less green than another in the loans that it made, it would make a difference. Interviewer: So it would be helpful to you know the lending profile of a bank in terms of environmental footprint of those loans? Yes, yes. If by knowing that it helps us make better investment decisions, then it becomes very helpful If there are ten [analysts] reports on the same bank, there going to be two or three analysts that consistently get it wrong because theyre not very good, theres going to be a bunch in the middle who are OK and theres going to be one or two who are outstanding and are consistently outstanding because they differentiate themselves and get it right. If youre trying to raise the bar for all of them thats very laudable and exciting and it would be great, but actually if they all come out with the same information then were no further forward. If they all come out and say, we know that bank X lends 50% of its China book to this particularly hideous polluter then the share price will fall because everybody thinks its a bad thing But if one of them then comes out and says, ah, but, it does do this but what the company has promised to do is clean up its act and theyre going to lend them even more money to put this new filter plant in, then thats really interesting information. The underlying company is doing well so theyll get the debt repaid and theyll put another loan on so theyll get another loan repaid, itll be profitable and its gone from a horrendous situation to a good one. That would be the differentiator. Interviewer: So in terms of environmental issues, there is potential for some side analysts to do better in

terms of value added. Yes.

Exhibit 5. Representative buy-side opinion on the materiality and usefulness of environmental narrative (in this case, usually in analysts reports).

Discussion
There is an apparent difference in the opinions on the materiality of environmental narrative expressed by the two cohorts. The reason appears to be attributable to the assumptions made by the two cohorts on the information needs or the levels of concern about environmental issues. The sell-side analysts presumed their customers the buy-side actors who consume their research to be overwhelmingly concerned with the financials. In practice, evidence from this study suggests that buy side actors value a richer array of company information than this. Because the buy-side tends not to systematically read company information directly, fund managers rely on sell-side research. The fact that fund managers and personal wealth managers on the buy side deal directly with selected members of the public means that they are more frequently exposed to issues on the general social agenda. Evidence from this study suggests that environmental concern is an issue raised by buy-side clients and that sell-side advice is usually inadequate as a reliable source upon which to offer client asset allocation advice. There was a clear difference of opinion on the proposition that the environmental profile of a banks loan book could be material to investors. The sell-side, for the most part, dismissed this idea as entirely immaterial. Even when it was put to analysts in terms of environmental risk, most still considered immaterial. The same was not true for the buyside who considered environmental loan book exposure to be capable of potentially reordering the attractiveness of a list of buys from the bank buy list. Evidence from the buy side suggests that the importance of the environment as an investor issue is growing and that the share buyer is likely to be one of the major drivers of the need for environmental information. This study concludes that the change agenda in corporate environmental reporting is driven more by the buy-side that the sell-side. The sell-side emerged from the study as truculent and dismissive of environmental issues generally and environmental reporting in particular. The fact that many analysts had not actually read an annual report environmental disclosure led, in some cases, to a misunderstanding of their contents. One analyst (A8) said, because its all about how much paper well Im guessing because I havent read one but Im guessing its all about how much paper theyve used and all this kind of stuff. Terribly irrelevant. It is the buy-side that acts as an interpreter of social attitudes to the financial investment community, but with no formal means of conveying changing attitudes up the

information supply chain to the sell side, sell-side analysts have been slow to change in their assumptions on the materiality of environmental concerns to banks. In terms of driving change in attitudes to environmental issues among participants in the wider capital market community, then, the evidence seems to suggest that participants exposed to end-user views are more likely to seek to drive change than those less so exposed. There is evidence that end-user attitudes are changing and that loan book environmental performance could be material to investment (either because of the environmental risk or the personal beliefs of the investor). Analysts reporting on this as part of their analysts reports would, according to our buy-side interviews, distinguish themselves and gain buy-side attention. Were this to happen, environmental information demand pressure would be exerted at the preparer-sell side interface and this, in turn, would be a potential force for change in corporate reporting, either through annual reports, stand-alone environmental reports or analysts presentations.

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