The study compared the annual lobbying spend in the US with green technology innovation and found that when it came to reducing environmental political risk, innovation won.

Lobbying had a marginal potential to enhance a firm’s value for the current year, but the effects did not last, while green innovation was considered value-enhancing for shareholders because offered competitive advantages and strengthened reputation by creating a green image among key stakeholders.

“Environmental political risk is defined as the political uncertainty associated with environmental issues, such as a carbon tax on fossil fuel-based energy consumption, mandated emissions caps or tightening existing environmental regulations,” co-author Dr Elisabeth Sinnewe said.

“We used corporate lobbying spending as an indicator of political activism to influence favourable policy outcomes and the number of approved green patents as defined by the US Patent and Trademark Office as a proxy for green innovation.

“Firms in environmentally sensitive industries tend to be particularly politically active to decrease unfavourable government laws or delay the policymaking process.”

PhD researcher and first author Sohanur Rahman said that, after statistical analysis, the results suggested that lobbying had the marginal potential to enhance firm value for the current year.

“However, such an effect does not last for future years,” Mr Rahman said.

“Our findings are consistent with previous research which found lobbying is characterised as a short-term opportunity-seeking instrument, not as a long-term political capital whose value is compounded into the market value of companies.

“Furthermore, our results confirm the view that green innovation can be a valuable competitive advantage as it is not easy to imitate by rivals, also green innovative companies gain competence in saving energy, lowering emissions and waste.

“Green innovation offers a benefits such as lower cost of capital and production costs and because they are less likely to violate fewer environmental regulations and thus pay lower levels of litigation costs and penalties.”