Conference Programme
Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available). Note that the schedule is subject to changes.
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Daily Overview |
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Parallel Session 04: Strategic Capital Allocation for Sustainability Location: Seminar Room 7 (Level 2) Session Chair: Narae Lee, KAIST | |
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Corporate Mitigation Strategy: Real Option Approach 1: Hang Seng University of Hong Kong; 2: National University of Singapore; 3: ISEG Lisbon School of Economics and Management 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. | |