Accounting & Management

- November–December 2024
- Article
How Robust Is Your Climate Governance?

By: Lynn S. Paine and Suraj Srinivasan

During the past few years, as evidence of climate change and its effects has mounted, many corporate boards have added climate governance to their agendas. But the maturity of boards’ climate-oversight processes and activities varies widely. To better understand how climate issues are being handled in the boardroom and to determine what good climate governance looks like in practice, the authors interviewed 20 directors who hold leadership positions on the boards of S&P 500 companies. Drawing from those interviews and other research, they identify eight hallmarks of meaningful climate oversight. For example, “the board is knowledgeable about the company’s climate profile,” “the board has the expertise needed for effective climate oversight,” and “the board can articulate the company’s climate positioning and strategy.” The authors also offer their perspective on the set of issues associated with each hallmark that corporate leaders must grapple with as they decide how to incorporate climate issues into their company’s governance. Climate concerns are here to stay, and climate governance will increasingly be seen as a core element of good governance.
- November–December 2024
- Article
How Robust Is Your Climate Governance?

By: Lynn S. Paine and Suraj Srinivasan

During the past few years, as evidence of climate change and its effects has mounted, many corporate boards have added climate governance to their agendas. But the maturity of boards’ climate-oversight processes and activities varies widely. To better understand how climate issues are being handled in the boardroom and to determine what good...
- 2024
- Working Paper
Climate Solutions, Transition Risk, and Stock Returns

By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim

Using large language models to measure firms' climate solution products and services, we find that high-climate solution firms exhibit lower stock returns and higher market valuation multiples. Their stock prices respond positively to events signaling increased demand for climate solutions. These firms also show higher future profitability during periods of regulatory uncertainty, unexpected increases in climate concerns, and when a larger share of their sales occurs in states with climate plans and stronger public support for addressing climate change. Overall, our results indicate that high-climate solution firms, whose business benefits as climate transition risks materialize, hedge investors against such risks.
- 2024
- Working Paper
Climate Solutions, Transition Risk, and Stock Returns

By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim

Using large language models to measure firms' climate solution products and services, we find that high-climate solution firms exhibit lower stock returns and higher market valuation multiples. Their stock prices respond positively to events signaling increased demand for climate solutions. These firms also show higher future profitability during...
- October 2024
- Case
Lanco Medical Group: Fostering Happiness for Growth

By: Susanna Gallani, Jenyfeer Martínez Buitrago and Katherine Sonnefeldt

This case describes how Lanco Medical Group, a fast-growing pharmaceutical distributor serving Latin America, approached the design of their employee benefits and incentives program. After learning about gaps between what leadership believed motivated employees and what employees actually valued, the organization sytematized the collection of data about drivers of employee motivation. Priorities varied between age group, organizational role, and geographic locations, signaling that a one-size-fits all solution was unlikely to succeed. With ambitions for regional and market expansion in the next few years, motivating and retaining employees was a top priority for the leadership team. The case highliths the tension between tailoring incentive design to employees' preferences while maintaining fairness and operating a manageable system as the company pursues aggressive international growth targets.
- October 2024
- Case
Lanco Medical Group: Fostering Happiness for Growth

By: Susanna Gallani, Jenyfeer Martínez Buitrago and Katherine Sonnefeldt

This case describes how Lanco Medical Group, a fast-growing pharmaceutical distributor serving Latin America, approached the design of their employee benefits and incentives program. After learning about gaps between what leadership believed motivated employees and what employees actually valued, the organization sytematized the collection of data...

About the Unit

The Accounting & Management unit at Harvard Business School strives to be the worldwide leader in research, course development, and teaching on top managements' use of performance measurement systems to:

Communicate with external investors to ensure that their firms' securities are fairly priced and that they are able to access capital,
Measure and evaluate their firms' economic performance,
Improve resource allocation and strategy implementation within their firms, and
Build accountability for performance through effective external and internal governance.

Unit research, course development, and teaching fall into two broad areas: Financial Reporting and Analysis and Management Accounting. Our research helps scholars and educators understand current best practices for the design and use of performance measurement systems that help managers to build more effective, value-creating organizations. Our teaching materials enable us to bring the results of this research into the classroom, and to practice.

Recent Publications

How Robust Is Your Climate Governance?

By: Lynn S. Paine and Suraj Srinivasan

November–December 2024 |
Article |
Harvard Business Review

During the past few years, as evidence of climate change and its effects has mounted, many corporate boards have added climate governance to their agendas. But the maturity of boards’ climate-oversight processes and activities varies widely. To better understand how climate issues are being handled in the boardroom and to determine what good climate governance looks like in practice, the authors interviewed 20 directors who hold leadership positions on the boards of S&P 500 companies. Drawing from those interviews and other research, they identify eight hallmarks of meaningful climate oversight. For example, “the board is knowledgeable about the company’s climate profile,” “the board has the expertise needed for effective climate oversight,” and “the board can articulate the company’s climate positioning and strategy.” The authors also offer their perspective on the set of issues associated with each hallmark that corporate leaders must grapple with as they decide how to incorporate climate issues into their company’s governance. Climate concerns are here to stay, and climate governance will increasingly be seen as a core element of good governance.

Keywords: Corporate Governance; Climate Change; Corporate Social Responsibility and Impact; Governing and Advisory Boards

Citation

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Climate Solutions, Transition Risk, and Stock Returns

By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim

2024 |
Working Paper |
Faculty Research

Using large language models to measure firms' climate solution products and services, we find that high-climate solution firms exhibit lower stock returns and higher market valuation multiples. Their stock prices respond positively to events signaling increased demand for climate solutions. These firms also show higher future profitability during periods of regulatory uncertainty, unexpected increases in climate concerns, and when a larger share of their sales occurs in states with climate plans and stronger public support for addressing climate change. Overall, our results indicate that high-climate solution firms, whose business benefits as climate transition risks materialize, hedge investors against such risks.

Keywords: Climate Change; Innovation; Sustainability; Technology; Artificial Intelligence; Generative Ai; Large Language Models; Environment; Climate Finance; Investing

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BWX Technologies - Student Version

By: Suraj Srinivasan and Yuan Zou

November 2024 |
Supplement |
Faculty Research

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BWX Technologies - Instructor Version

By: Suraj Srinivasan and Yuan Zou

November 2024 |
Supplement |
Faculty Research

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Catalysts for Climate Solutions: Corporate Responses to Venture Capital Financing of Climate-tech Startups

By: Shirley Lu, George Serafeim and Simon Xu

2024 |
Working Paper |
Faculty Research

We study whether incumbent firms increase their product focus on climate solutions in response to venture capital (VC) financing of climate-tech startups. Using large language models to measure a firm's focus on climate solutions, we find that incumbents in similar product markets as VC-backed startups increase their product focus on climate solutions. Consistent with VC investment serving as a signal for future demand and commercial potential of climate solutions, the increase is more pronounced when the VC investment demonstrates more promising financial prospects and has higher visibility. Additionally, incumbents with a pre-existing focus on climate solutions are more likely to respond, and their stock prices respond positively in anticipation of future benefits from the commercial potential of climate solutions. Overall, the results suggest that VC financing of climate-tech startups serves as a signal of the commercial viability for climate technologies, thereby catalyzing incumbents' investments in climate solutions.

Keywords: Climate Change; Climate Finance; Innovation; Technology; Entrepreneurship; Venture Capital; Private Equity; Environment; Sustainability

Citation

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