Key Terms

Environmental ImpactKEY TERM

Factors that relate to a company’s interaction with the physical environment.

Examples: Climate change, greenhouse gas emissions, air and water pollution, water scarcity, deforestation

ARTICLE PREVIEW: “Reducing Environmental Impact Is Now A Business Imperative” (Forbes, 2020)

“Nearly every day, another research finding, news story or environmental-related disaster piles more evidence on the reality that our planet is in crisis. Climate-driven drought is making dangerous wildfires more common, wreaking havoc on farmers around the world, and threatening hundreds of species with extinction.”

“Experts have warned that lack of action could result in alarming hunger levels around the world, mass migration challenges, the collapse of global financial markets and other social and economic disasters. Against this backdrop, business leaders are reexamining their organizations’ purposes and priorities.”

“More and more, the pursuit of similar actions to reduce environmental impact and benefit society will be necessary for businesses to survive, let alone thrive. Consumers are demanding that the companies they patronize do more to be good corporate citizens. They’re speaking with their voices and their wallets, and they’re not inclined to take “no” for an answer.”

“Fortunately, profit incentives—as well as executives’ increasing fears about climate change’s potential negative effect on business operations—are giving companies plenty of reasons to join with citizens and act on climate change.”

How do ENVIRONMENTAL factors impact company value?

When companies fail to consider the effects of their operations, policies and practices on the environment, they can become exposed to financial risk.

• Government or regulatory sanctions • Criminal prosecution • Damage to company reputation • Supply chain disruptions • Fines and penalties • Social capital (i.e. boycotts) • Physical damage to facilities • Loss of productivity

When a company positively or negatively impacts the environment, their stock price may fluctuate.

STOCKSKEY TERM

Stocks are shares (pieces) of ownership in a company.

STOCK MARKET KEY TERM

The collection of physical and electronic markets where buyers and sellers can trade shares. It is like a giant, global auction.

Most trading happens through stock exchanges.

The stock market is the sum of all individual stocks and when an individual stock moves, the market as a whole also moves by a tiny amount.

Often, the stock market will move up or down because of larger events occuring in a certain country or around the world.