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Dr Danial Hemmings, Lecturer in Finance at ¾«¶«´«Ã½ Business School, is attending the 2nd Conference on International Finance, Sustainable and Climate Finance and Growth (CINSC) conference this June. The CINSC event, which features a rich programme of presentations by leading academics, is organised by the Future Finance and Economics Association (FFEA) and University of Ljubljana, School of Economics and Business. It takes place at University of Ljubljana, Slovenia. The 2023 conference follows in the success of last year’s CINSC conference at Università degli Studi di Napoli 'Parthenope', in which ¾«¶«´«Ã½ Business School’s submission was awarded ‘Best Paper’.

At the event, Danial is presenting a collaborative research paper, co-authored with Dr Zhe An of Monash University, Australia, and Dr Wenjie Ding of Sun Yat-Sen University, China. The paper examines how prior environmental experience is factored in elections of directors to corporate boards. Each year, shareholders of publicly listed companies vote whether to (re)elect individual directors to the board. While most director nominees are elected, the share of supporting votes reveals information on shareholders’ satisfaction and preferences. Danial and his co-authors extend the academic literature on director elections to examine what differences in vote results for directors, conditional on specific expertise in environmental sustainability, can tell us about investors’ preferences.

The research is timely, given the global challenge to address climate change, which in large part relies on actions of corporate leaders. Environment (e.g., climate change) related risks and opportunities are increasingly prominent agenda items at board-level. However, reports are that critically low numbers of board directors have adequate expertise to identify, evaluate and address them. Prior research has identified positive effects of board-level environment expertise on firm environmental performance. The current study explores the perceived value of environmental expertise on boards to shareholders. In doing so, it also seeks to identify plausible reasons for the lack of environmental expertise on boards.

Using a battery of empirical tests that account for other possible factors in director election votes, Danial and his co-authors find surprisingly little evidence that environmental experience is valued by shareholders. Instead, some evidence is found of shareholder satisfaction reducing in environmental experience, when possessed by directors with significant influence over firms’ executive function, and when firms perform strongly on environmental objectives but weakly on financial objectives. They also find that exogenous shocks to sustainability preferences of mutual fund managers experiencing major natural disasters lead to short-term increases in support for environmentally experienced directors.

The project contributes towards a core focus of the BBS Institute of European Finance (IEF) Accounting and Governance group (which Danial leads) on sustainable accounting and governance. Danial’s attendance at the CINSC conference should also serve to reinforce the IEF’s external networks and esteem in respect to this important and topical research area.