Preliminary Conference Programme

One fundamental challenge in sustainable investing is to distinguish value from values (Starks 2023). Leveraging the Tick Size Pilot Program (TSP)—a natural experiment that increased treatment firms’ tick size from one cent to five cents—we find that green institutional investors with a relatively low willingness-to-pay for environmental objectives (i.e., value investors) significantly influence corporate environmental policies. During the TSP, these value investors reduced their divestment intensity following environmental incidents at treatment firms, relative to control firms. Treatment firms’ environmental ratings declined, with the drop most pronounced among those highly exposed to exit threats on environmental issues.

Firms increasingly commit to dual objectives of financial performance and environmental sustainability. Yet they struggle to execute these strategies, as strategic capital allocation decisions often pit short-term financial impacts against long-term environmental consequences. We examine how environmental impact valuation can be integrated into management control systems so that environmental sustainability meaningfully shapes strategic capital allocation. Drawing on Simons’ (1995) Levers of Control framework, we present a 20-month single case study of TOOLIX, a capital-intensive multinational in the construction industry. Based on 60 interviews, focus groups, internal documents, analytical simulations, and observations of major investment decisions, we show how environmental impact valuation, as both a qualitative practice (purpose, strategic narratives) and a quantitative practice (prices, lifecycle metrics), was progressively integrated into belief, boundary, diagnostic, and interactive control systems. From this integration, we identify three mechanisms - temporal bridging, attention anchoring, and structural coupling - through which managers address dual objective control challenges. We discuss how these mechanisms depend on a strong belief system that legitimises environmental impact valuation and enables its effectiveness. In doing so, the study refines theories of management and sustainability control and offers design implications for dual objective alignment in strategic capital allocations.

In response to pressure to mitigate environmental impacts (e.g., GHG emissions), firms face the dual challenge of meeting environmental requirements while maintaining financial profitability through their chosen mitigation strategy. Firms can pursue this through either substantive actions—which permanently reduce impacts via operational or technological innovation (encapsulated as abatement)—or symbolic actions—which meet targets through the purchase of offset credits (encapsulated as offset). While abatement is socially preferable, the firm-level calculus often favors offsetting as a lower-risk option, leading to a socially sub-optimal outcome. Motivated by the need to encourage substantive corporate action, this research examines the conditions under which firms choose abatement over offset. We develop a financial model using a real options approach, supported by scenario analysis and empirical validation. Our findings emphasize that the choice of abatement depends on firm- and institution-specific favorable conditions, particularly a firm’s high technological confidence and the presence of a high (or stringent) environmental tax rate.