Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

Barbier, Edward B.; Burgess, Joanne C.

doi:10.3390/su10010013

Cited by 9 publications

(9 citation statements)

References 27 publications

(85 reference statements)

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“…Their ability to create excessive revenue through monopoly power can provide an important opportunity for TNCs to channel funds and investments into sustainable management, protection and regeneration of natural resource and environmental assets. The importance of corporate social responsibility is being increasingly recognized by TNCs, and is creating incentives for more sustainable business practices [67][68][69]. Further research is required to explore the conditions under which it is in the interests of TNCs to take a positive, leading role in managing their environmental and natural resource assets and embracing broader planetary environmental safeguards.…”

Section: Discussionmentioning

confidence: 99%

Sustainable Use of the Environment, Planetary Boundaries and Market Power

Barbier

Burgess

2021

Sustainability

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Many of the environment and natural resources that constitute key “safe operating spaces”, as designated by planetary boundaries, are being exploited by a handful of large firms with considerable market share. In this paper, we discuss how the environment and natural resources that occur within a safe operating space can be treated as an exploitable finite stock. We use an optimal depletion model to show how the extraction of these exhaustible assets can be managed optimally, and allow for adjustment in price paths due to technological innovation and environmental externalities. Given the growing market concentration and monopoly power in the key economic sectors that exploit the environment and resources that constitute many safe operating spaces, we then explore how monopoly conditions can alter the extraction and price path of the environmental assets over time compared to that under competitive market conditions. We show that the monopoly may be compatible with more sustainable use, by extending the life of the exploitable, depletable stock, at the expense of firms capturing excessive resource rents from exploitation. This tradeoff means that any policies implemented to tax the excessive monopoly rents need to be designed without compromising the sustainable use of the environment. The tax revenue raised can be channeled into protecting or regenerating natural assets that are essential for global environmental sustainability. If investment in regeneration efforts is sufficiently substantial, or if the wider social and environmental values associated with the exhaustible assets are taken into account, then the safe operating space may be conserved indefinitely. Such policy challenges will become increasingly important as dominant firms exert market power over the planet’s remaining environment and resources that constitute key “safe operating spaces”, as designated by planetary boundaries.

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Section: Discussionmentioning

confidence: 99%

Sustainable Use of the Environment, Planetary Boundaries and Market Power

Barbier

Burgess

2021

Sustainability

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“…However, they are inconsistent with national experimental studies (Borba et al, 2012), which points to environmental accounting information as relevant by investment analysts, investors and teachers and from specific contexts such as Bangladesh (Sultana et al, 2018), France (Baboukardos, 2018), East Asia (Barbier and Burgess, 2017) and one Brazilian northeastern capital (Lemos et al, 2014). Przychodzen et al (2016) highlighted that the general predisposition to incorporate environmental nonfinancial drivers in the investment decision-making process among asset managers is strongly motivated by the desire to mitigate risk (especially in a short-term horizon) and by the herding tendency and is not explicitly connected with the potential for additional value creation.…”

Section: Jfra 223mentioning

confidence: 99%

Nonfinancial value creation of integrated reporting

Ribeiro

Ezequiel

Zotes

et al. 2022

JFRA

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Purpose This paper aims to explore the nonfinancial drivers of value creation that influence an investment decision and present a set of drivers that contribute with a useful integrated reporting to its providers of financial capital using evidence from Brazil. Design/methodology/approach This paper is based on a systematic literature review in the Scopus, Web of Science and Google Scholar databases in the period from 2005 to 2020. Interpretive content analysis is used in 42 documents identified to explore nonfinancial drivers to demand by providers of financial capital, which are classified according to the capitals nonfinancial suggested by the integrated report (IR). Then, the results are evaluated by Brazilian professional investors in a focus group. Findings The members of the focus group do not consider the IR relevant to investment decision and neither the information about natural capital nor social capital. They highlighted two nonfinancial drivers of value not identified in the previous literature. Research limitations/implications The focus group is limited by subjects’ availability and by the participants’ number. But its results represent initial discussions on the subject in the Brazilian context. Practical implications The results of this study have value, principally, to investors, target audience of IR, because it aligns your demands with the IRs content, improving its usefulness. Originality/value To the best of the authors’ knowledge, this manuscript is the first study to investigate the perception of Brazilian professional investors about the importance of the IR in investment decision-making and to identify content relevant to the financial capital provider’s investment decision, which can improve the usefulness of IR.

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“…From their interview data, it is clear that managers use management accounting technology as a risk management tool to mitigate risks related to climate change. Barbier and Burgess (2018) discuss how global enterprises, especially those in East Asia, seek to deal with climate risks via commitment, pricing mechanisms, scientific and technological innovation and other measures. Pinkse and Gasbarro (2019) investigate how enterprises in the oil and gas industry seek to improve cognitive ability to adapt to physical changes caused by climate risk.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Dunning (1981) shows that FDI is determined by the three basic factors of O-advantage, L-advantage and I-advantage. O-advantages include the company’s technical advantages and organizational management capabilities, while investors in high climate risk countries adopt risk-resistant technical means, hardware equipment and organization charters to increase long-term risks adaptation (Barbier and Burgess, 2018; Gasbarro and Pinkse, 2016; Pinkse and Gasbarro, 2019; Pinkse and Kolk, 2010; Weinhofer and Busch, 2013). The purpose is that they can then better identify climate risk (Todaro et al , 2021), while gaining increased ability to deal with climate risk and so improve their O-advantage.…”

Section: Theoretical Model and Hypothesis Developmentmentioning

confidence: 99%

Climate risk, climate risk distance and foreign direct investment

Xing

Wang²

2022

IJCCSM

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Purpose Climate risk greatly increases the risk exposure of global investments. Both the climate risks of home countries and host countries may affect international investment behaviors. The purpose of this paper is to explore the impact of climate risk and climate risk distance on foreign direct investment (FDI) inflows and outflows. Targeted proposals are provided to promote international economic and trade cooperation and the authors provide suggestions for the FDI strategies of multinational enterprises. Design/methodology/approach The authors define “climate risk distance” as the difference in climate risks between two countries. This paper uses both a theoretical model and a generalized least squares test to investigate the impact of climate risk distance on FDI from the perspectives of FDI inflows and outflows. In addition, the authors subdivide the samples according to the sign of climate risk distance and rank the FDI share from home country to host country into four groups according to the host country’s climate risk index. Finally, the authors undertake empirical tests with outward foreign direct investment (OFDI) data to support the empirical results. Findings Investors from countries with low climate risks have the upper hand due to their competitive advantages, like their skills, trademarks and patent rights, which they can transfer abroad to offset the disadvantage of being non-native. This is generally defined as ownership advantage. The impact of climate risk distance on FDI depends on the sign of climate risk distance. Specifically, host countries with higher climate risks compared with the climate risk levels of home countries may experience insignificant reductions in FDI inflows. For investors from home countries with higher climate risks, they are less likely to invest in host countries with lower climate risks. The results for samples from emerging market economies are shown to be more significant. Originality/value This study advances the O (ownership advantage) part of the ownership, location and internationalization (OLI) paradigm by incorporating the climate risk distance between the home country and the host country into the influencing factors of FDI. Both the O part and the L (location advantage, the advantage that host countries offers to make internationalization worthwhile to undertake FDI) part of the OLI paradigm concerning climate risks are validated with FDI and OFDI data.

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Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

Cited by 9 publications

References 27 publications

Sustainable Use of the Environment, Planetary Boundaries and Market Power

Sustainable Use of the Environment, Planetary Boundaries and Market Power

Nonfinancial value creation of integrated reporting

Climate risk, climate risk distance and foreign direct investment

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