What are two good arguments to explain how shareholders could benefit from investments in green innovations.

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
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ZoomGo Ltd is a transport and logistics company. In the last 15 years, the company has grown from a start-up to a successful and profitable company with revenue in excess of $100m. The founders have decided to list the company’s shares on the New Zealand stock exchange (NZX). After listing, the company's environmental practices will be closely scrutinised by investors.
 
The two founders, Sharon and Bill, will stay as directors of ZoomGo (the listed company, or ListCo). Bill thinks the ListCo should be 100% focused on shareholder value maximisation and only spend the minimum amount of money to make climate-related disclosures required by the New Zealand government and regulators.

 

Sharon believes that the ListCo should be more proactive in managing its climate risk. This includes investing in green innovation projects. These projects are not likely to bring any immediate financial benefits, as well as being NPV negative based on reasonable cashflow projections and discount rate assumptions. She knows that it might be the right thing to do for the ListCo financially. 

 

What are two good arguments to explain how shareholders could benefit from investments in green innovations.

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