Do green financial policies offset the climate transition risk penalty imposed on long-term sovereign bond yields?

Asset valuations in high-carbon sectors face significant corrections due to climate risks. This paper specifically analyses whether markets impose a penalty on long-term sovereign bonds issued by countries facing higher climate-related transition risk while rewarding those that have implemented green financial policies to mitigate these risks. We find that higher carbon dioxide emissions and a lower sustainable development score (both proxies for transition risks) lead to an increase in long-term sovereign bond yields. However, the presence of green financial policies appears to offset this climate transition risk premium.     

Countering the biggest risk of all

Corporate treasurers and chief financial officers have become adept at quantifying and managing a wide variety of risks: financial (for example, currency fluctuations), hazard (chemical spills), and operational (computer system failures). To defend themselves, they use tried-and-true tools such as hedging, insurance, and backup systems. Some companies have even adopted the concept of enterprise risk management, integrating available risk management techniques in a comprehensive, organization-wide approach. But most managers have not addressed in a systematic way the greatest threat of all--strategic risks, the array of external events and trends that can devastate a company's growth trajectory and shareholder value. Strategic risks go beyond such familiar challenges as the possible failure of an acquisition or a product launch. A new technology may overtake your product. Gradual shifts in the market may slowly erode one of your brands beyond the point of viability. Or rapidly shifting customer priorities may suddenly change your industry. The key to surviving these strategic risks, the authors say, is knowing how to assess and respond to them. In this article, they lay out a method for identifying and responding to strategic threats. They categorize the risks into seven major classes (industry, technology, brand, competitor, customer, project, and stagnation) and describe a particularly dangerous example within each category. The authors also offer countermeasures to take against these risks and describe how individual companies (American Express, Coach, and Air Liquide, among them) have deployed them to neutralize a threat and, in many cases, capitalize on it. Besides limiting the downside of risk, strategic-risk management forces executives to think more systematically about the future, thus helping them identify opportunities for growth.     

Business strategies and management accounting in response to climate change risk exposure and regulatory uncertainty

This study aims to theorise and foster a better understanding of the strategies organisations adopt to respond to the risks and opportunities emerging from changing government climate change policies and the supporting management accounting adopted. Data include interviews and archival documents from five New Zealand electricity generators. We construct a theoretical framework that links climate change risks and opportunities to strategic responses. Climate change risk exposure increased during the period due to changes in the estimation/perception of climate change risks, market opportunities and regulatory uncertainty. Organisations' strategies changed in response, moving from a stable strategy to different combinations of anticipatory, proactive, and creative strategies, and finally regressing to a reactive strategy. Carbon management accounting changed to support the new strategy adopted in each time period. Long term physical and monetarised accounts for sustainability and extensive use of carbon information were prevalent during periods when the companies employed a proactive or creative strategy. In contrast, short-term physical accounts for unsustainability and limited use in decision-making were observed when the companies adopted stable, anticipatory or reactive strategies. Regulatory uncertainty was found to be the major constraint to a proactive strategy and carbon management accounting development in response to climate change.     

Climate Change Policy in Australia: Organisational Responses and Influences

This paper uses a case study approach to examine (a) the nature of organisational responses to climate change policy using the Kolk and Pinkse (2004, 2005) typology; and (b) key drivers for action on climate change. We find evidence consistent with the evolution of responses from setting emission targets (cautious planners, emergent planners) to process innovation and product development (internal explorers). The exception to such linear development is horizontal explorers, who explore competitive opportunities in markets outside their current business. Key drivers for action include managerial perceptions of business opportunities, product differentiation and an implicit regard for the environment. Major impediments include uncertainty about the detail of climate change policy and managerial perceptions of business risk. At present, the intended strategic trading behaviour of the case organisations is best described as muted. However, the national institutional environment of which a liberal market economy and a carbon service industry are key, appear conducive to the future acceptance and active adoption of emissions trading in Australia.     

International trade and climate change

This paper provides a selective review of the interaction between international trade, international trade policies, environmental policies and climate change. The focus is on the role that international trade and the existence of countries have on the generation of emissions leading to greenhouse gas stocks in the atmosphere and hence, potentially, to climate change and on the role of trade and environmental policies in dealing with this global externality. We first review the question of whether trade exacerbates or contributes to the climate change problem by increasing global emissions, a particularly important issue being the pollution haven problem. Then we consider environmental policies and trade. We analyse non-cooperative environmental policies and investigate whether trade undermines the effectiveness of unilateral environmental policies, in which carbon leakage and international competitiveness are of particular importance. To deal with climate change, cooperation among countries is important. In this aspect, we review the interactions between trade and environmental policies, border tax adjustment policies, and the role of the World Trade Organization in combating climate change arising from economic activities.     

Time-frequency spillovers among carbon,fossil energy and clean energy markets: The effects of attention to climate change

We explore the time-frequency spillovers among carbon, fossil energy and clean energy markets, and consider the casual effects of climate change attention. The spillover effects among carbon, fossil energy and clean energy markets are time-varying. Carbon market is a net receiver of spillovers from the oil market and clean energy markets in the short term, but it becomes a net transmitter of spillovers to the coal and gas markets in the long term. Our marginal spillover effects analysis suggests that the COVID-19 pandemic has increased cross-market risk contagion in the long term and that carbon market bears larger input risks. Investors' attention to climate change has significant causal effects on the spillovers, and the causal impact of climate change attention on total spillover has significantly increased during the COVID-19 pandemic. Our findings provide important guidelines for investment in environmental protection and demonstrate the importance of formulating differentiated policies for environmental protection in different time horizons.     

Who owns the long term? Perspectives from global business leaders

Day-to-day management is challenging enough for CEOs. How do they manage for the long term as well? We posed that question to four top executives of global companies. According to Maurice Levy, chairman and CEO of Publicis Groupe, building the future is really about building the present and keeping close to the front line--those who deal with your customers and markets. He also attributes his company's success in large part to knowing when to take action: In a market where clients' needs steer your long-term future, timing is everything. UPS Chairman and CEO Mike Eskew emphasizes staying true to your vision and values over the long run, despite meeting obstacles along the way. It took more than 20 years, and many lessons learned, to produce consistent profits in what is today the company's fastest-growing and most profitable business: international small packages. Wulf H. Bernotat, CEO of E.ON, examines the challenges facing business leaders and politicians as they try to balance energy needs against potential environmental damage. He calls for educating people about consumption and waste, and he maintains that a diverse and reliable mix of energy sources is the only way to ensure a secure supply while protecting our environment. Finally, Marianne Barner, the director of corporate communications and ombudsman for children's issues at IKEA, discusses how the company is taking steps to improve the environment and be otherwise socially responsible. For example, it's partnering with NGOs to address child labor issues and, on its own, is working to help mitigate climate change. IKEA's goals include using renewable sources for 100% of its energy needs and cutting its overall energy consumption by 25%.     

Can enhancing financial inclusivity lower climate risks by inhibiting carbon emissions? Contextual evidence from emerging economies

Climate change is regarded as a global concern whereby lowering climate risks, especially by curbing greenhouse gas emissions, has become a critically important policy agenda worldwide. Hence, this study assesses whether financial inclusion, alongside energy efficiency improvement, renewable energy use, economic growth, international trade, and urbanization, can mitigate carbon dioxide emissions in 22 emerging economies. Considering the period of analysis from 2008 to 2018 and utilizing econometric methods robust to handling cross-sectionally-dependent, heterogeneous, and endogenous panel data, the findings reveal that financial inclusion is directly associated with higher discharges of carbon dioxide. Contrarily, energy efficiency improvement and higher share of renewable energy in the aggregate energy consumption level inhibit carbon dioxide emissions. Moreover, energy efficiency gains moderate the financial inclusion-emissions nexus by jointly reducing carbon emissions with greater financial inclusivity. Finally, the results indicate that economic growth, international trade, and urbanization trigger climate risks by boosting the emission figures. In light of these findings, several carbon dioxide-mitigating policies are recommended for neutralizing climate risks in emerging countries of concern.     

Risk regulation,community pressure and the use of management accounting in managing climate change risk: Australian evidence

This exploratory study is amongst the first to investigate how companies perceive the regulation of carbon emissions and the pressure exerted by the community in an environment characterised by risk and uncertainty. Semi-structured interviews were conducted among 39 executives who were directly involved in carbon emissions management in 18 large listed Australian companies. Consistent with Prospect Theory, we find that decision-makers are threat biased and are more likely to take immediate actions when climate change issues are framed as threats as opposed to opportunities. From the interview data, it is seen that managers use management accounting techniques as a risk management tool in mitigating risks associated climate change issues. Furthermore, this use of management accounting appears to be driven primarily by the protection of economic interests, regulatory pressure and reputational pressure. The study provides insights into how perceptions of climate change uncertainties and external pressure for disclosure of emissions information influence companies to use management accounting in managing climate change risk.     

Factors contributing to business actions in response to climate change in Korea

Climate change is a growing problem and has been highlighted as a global issue. Empirical evidence increasingly indicates its obvious potential risks to humans and society. As members of this society, business organizations face greatly diverse climate change-related risks that they must recognize and respond to. However, gaps exist between scientific evidence and the actions of business organizations. Few empirical studies have examined the business organizations’ actions taken in response to climate change in Korea. This paper addresses this critical gap in the climate change literature by examining business organizations’ behaviors and identifying the factors influencing their actions. We employ statistical models to compare corporate climate change actions, and we explain their variations using survey data. The results indicate that despite increasing concerns about climate change, businesses have implemented very limited precautionary mitigation and adaptation actions. In addition, the concerns of the businesses about future climate change impact, organizational capacity (leadership, staff capacity, existence of a relevant division or department), and business size are significant factors with respect to the implementation of climate change actions.     

市场激励型环境规制可以推动企业技术创新吗？——基于中国碳排放权交易机制的自然实验

提高环境标准以推进企业低碳环保转型是供给侧结构性改革的重要内容。在众多环境规制的政策工具中,以市场激励为导向的排放权交易机制在西方国家得到了较为广泛的认可与应用,但是否同样适用于尚处在转轨期的新型中国市场还有待进一步检验。本文基于中国2013年开始试点实施的碳排放权交易机制,考察了市场激励型的环境规制对中国企业技术创新的影响。研究发现:碳排放权交易机制的实施显著推动了企业的技术创新,且当碳市场的流动性程度越高,该市场激励型环境规制对企业技术创新的推动作用更加明显。但企业成本转嫁能力会在一定程度上削弱该环境规制的积极影响,当企业所承受的产品市场竞争程度更低、企业对客户和供应商的议价能力更高时,碳排放权交易机制对企业技术创新的推动作用相对降低。综上,本文的研究不仅从市场激励的角度丰富了环境规制与企业技术创新的相关文献,同时也为中国碳排放权交易实施的政策效果提供了微观证据,研究结论可为后续在全国范围内统一推进碳排放权交易市场建设提供政策参考。     

Governance and Climate Change: A Success Story in Mobilizing Investor Support for Corporate Responses to Climate Change

Until fairly recently, the main approach to getting business to respond to climate change has been top‐down efforts to regulate emissions and enact various forms of “carbon pricing.” The aim of such efforts has been to make businesses “internalize” the costs associated with greenhouse gas (GHG) emissions. Governments are expected to set the environmental protection rules for companies in their respective countries, and markets are expected to adjust to the new regulations and carbon prices. But this classical approach to economic policy does not work when applied to a global “public goods” challenge like trying to limit the extent and effects of climate change. Instead of a top‐down approach, in which economic actors are forced to respond to regulations imposed on them, the Paris climate agreement of 2015 was reached using a bottom‐up approach centered on the concept of Intended Nationally Determined Contributions (INDCs)—along with a process that ended up encouraging the participation of all economic actors, not just governments. The authors provide an account of how the Paris agreement was reached, and why the “Portfolio Decarbonization Coalition” under the auspices of the United Nations is the most important of several private‐sector initiatives that are changing the way corporations operate. Thanks in large part to the PDC, investors can now undertake meaningful corporate governance action on climate change. With GHG emissions from a particular companies’ operations now much easier to measure, objective performance metrics on GHG emissions can now be set by boards and verified by shareholders. And current decarbonized indexes can be used as performance benchmarks for asset managers’ compensation, which can be tied to return outperformance relative to a “decarbonized” index.     

The curious case of Canadian corporate emissions valuation

This study examines the relevance to investors of the greenhouse gas (GHG) emissions of publicly-traded Canadian firms over 2006–2018. Based on two independent datasets, we document that firm value varies positively in the level of emissions. This result suggests that the Canadian setting differs from those studied previously, notably because of low climate litigation risk and national and subnational expenditure policies to offset climate impacts on the economy. While national and subnational expenditures to mitigate emissions affect firms' on-balance-sheet costs and profits, investors price the future payoffs to these expenditures into firm value. Supporting this view, we find that the positive relation between emissions and firm value in Canada is amplified for high GHG-intensity firms (mainly energy firms in Alberta), whose future payoffs to environmental policies and spending exceed those of low GHG-intensity firms. Our results are consistent with investors’ recognition of the benefits to firm value of national and subnational policies to decarbonize the Canadian economy.     

The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms

This study examines the effects of board characteristics and sustainable compensation policy on carbon reduction initiatives and greenhouse gas (GHG) emissions of a firm. We use firm fixed effect model to analyse data from 256 non-financial UK firms covering a period of 13 years (2002–2014). Our estimation results suggest that board independence and board gender diversity have positive associations with carbon reduction initiatives. In addition, environment-social-governance based compensation policy is found to be positively associated with carbon reduction initiatives. However, we do not find any relationship between corporate governance variables and GHG emissions of a firm. Overall, our evidence suggests that corporate boards and executive management tend to focus on a firm's process-oriented carbon performance, without improving actual carbon performance in the form of reduced GHG emissions. The findings have important implications for practitioners and policymakers with respect to the effectiveness of internal corporate governance mechanisms in addressing climate change risks, and possible linkage between corporate governance reform and carbon related policies.     

试论我国碳排放权期货市场的构建

随着全球温室效应和气候变暖问题的日益严重,二氧化碳的减排越来越受到了人们的重视,以二氧化碳排放权为标的的国际碳排放权交易市场应运而生。期货市场具有价格发现、套期保值等功能,对于发展迅猛的碳排放权交易市场来说,建立碳排放权期货市场有重要的意义。本文首先简要介绍碳排放权交易市场,接着阐述我国建立碳排放权期货市场的必要性,然后分析我国建立碳排放权期货市场的可行性,最后提出我国开展碳排放权期货交易的设想。     

Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately?

This paper empirically assesses the relevance of information on corporate climate change disclosure and performance to asset prices, and discusses whether this information is priced appropriately. Findings indicate that corporate disclosures of quantitative greenhouse gas (GHG) emissions and, to a lesser extent, carbon performance are value relevant. We use hand‐collected information on quantitative GHG emissions for 433 European companies and build portfolios based on GHG disclosure and performance. We regress portfolios on a standard four factor model extended for industry effects over the years 2005 to 2009. Results show that investors achieved abnormal risk‐adjusted returns of up to 13.05% annually by exploiting inefficiently priced positive effects of (complete) GHG emissions disclosure and good corporate climate change performance in terms of GHG efficiency. Results imply that, firstly, information costs involved in carbon disclosure and management do not present a burden on corporate financial resources. Secondly, investors should not neglect carbon disclosure and performance when making investment decisions. Thirdly, during the period analysed, financial markets were inefficient in pricing publicly available information on carbon disclosure and performance. Mandatory and standardised information on carbon performance would consequently not only increase market efficiency but result in better allocation of capital within the real economy.     

碳金融业务分层模型及发展思路

碳金融的内涵从狭义到广义可划分为三个层次,分别基于碳交易、碳减排和气候变化的应对行动.广义的碳金融业务据此分为三个市场:低碳产业投融资市场、碳交易市场和气候风险资本市场,这三个市场共有绿色信贷、低碳产业直接融资、碳指标及衍生品交易、碳交易中介服务、碳金融理财产品、天气衍生品和巨灾债券七种业务模式.本文以制度、市场和组织...     

Strategy as ecology

Microsoft's and Wal-Mart's preeminence in modern business has been attributed to any number of factors--from the vision and drive of their founders to the companies' aggressive competitive practices. But the authors maintain that the success realized by these two very different companies is due only partly to the organizations themselves; a bigger factor is the success of the networks of companies with which Microsoft and Wal-Mart do business. Most companies today inhabit ecosystems--loose networks of suppliers, distributors, and outsourcers; makers of related products or services; providers of relevant technology; and other organizations that affect, and are affected by, the creation and delivery of a company's own offering. Despite being increasingly central to modern business, ecosystems are still poorly understood and even more poorly managed. The analogy between business networks and biological ecosystems can aid this understanding by vividly highlighting certain pivotal concepts. The moves that a company makes will, to varying degrees, affect the health of its business network, which in turn will ultimately affect the organization's performance--for ill as well as for good. Because a company, like an individual species in a biological ecosystem, ultimately shares its fate with the network as a whole, smart firms pursue strategies that will benefit everyone. So how can you promote the health and the stability of your own ecosystem, determine your place in it, and develop a strategy to match your role, thereby helping to ensure your company's well-being? It depends on your role--current and potential--within the network. Is your company a niche player, a keystone, or a dominator? The answer to this question may be different for different parts of your business. It may also change as your ecosystem changes. Knowing what to do requires understanding the ecosystem and your organization's role in it.     

生态法治对债券融资成本的影响——基于我国环保法庭设立的准自然实验

实现经济增长和“双碳”生态目标相协调的高质量发展,既需要在全面绿色转型中充分发挥金融市场重要的资源配置导向作用,也离不开强有力的生态环境法治保障。本文基于我国中级人民法院环保法庭设立的准自然实验,运用渐进三重差分方法检验生态法治建设对我国信用债券融资成本的影响。研究发现,环保法庭设立后,当地高污染行业企业面临环境政策转型风险,其债券融资成本相对低污染行业企业显著增加。本文提出并验证了中级环保法庭设立的诉讼风险效应、维权监督效应、经营成本效应和决策制约效应。进一步分析发现,环保法庭设立对债券融资成本的影响在法律环境更好、政府环境治理激励更强的样本中更大。在考虑环保法庭设立内生性等稳健性检验后,主要结论依然成立。本文补充了地区环境司法能力提升促进资本市场绿色导向功能的经验证据,拓宽了“法与金融”的研究视角,为生态法治建设和市场主导下的经济绿色转型提供了有益启示。