The financial markets have been accused of showing little interest in environmental pressures due to the fact that the markets have played little part in providing rewards or penalties. 

This paper argues that the environmental message will not penetrate the markets so long as it is presented as something morally desirable or even as an opportunity to make a profit.  The message will make its strongest impact if it focuses on environmental risk, and the losses that companies may suffer through their environmental liabilities.

David Lascelles proposes an environmental rating scheme as a means of creating a stronger collective awareness in the markets about environmental pressures.  Two questions that would be asked to determine the ratings are:

1.      How large are the company’s potential environment-related liabilities and costs? and

2.      How well-placed is it managerially and financially to deal with them?

The creation of this yardstick would allow the market to differentiate levels of environmental risk and price them accordingly, which would create a new market in environmental risk instruments which could be used as hedges by investors, lenders and insurers.  In addition, it would restore liquidity to markets which have seized up through fear of environmental loss.