Resumo

Environmental innovation refers to new or modified processes, techniques, systems and products that act to prevent or reduce environmental damage (Kemp & Pontoglio, 2011), i.e. it is a component of business innovation that acts to reduce environmental impact to achieve sustainable development (Al-Shami & Rashid, 2021).Firm risk can be minimised, managed or reduced, but it is difficult to eliminate it completely, and more difficult when firm risk is associated with economic, political and social events called systematic risks (Garcia et al., 2017).

The research questions are as follows: (1) To what extent does environmental innovation influence firms' systematic risk? (2) To what extent does gender diversity moderate the environmental innovation- firms' systematic risk nexus? (3) To what extent does independent director diversity moderate the relationship between environmental innovation and firms' systematic risk? and (4) To what extent does specific skill diversity moderate the environmental innovation-firms' systematic risk?

Risk management theory posits that companies increase their engagement in environmental and social activities to mitigate negative effects on their reputation (Col & Patel, 2019). According to risk management theory, companies with higher environmental performance have stakeholder loyalty because they have accumulated moral capital, and loyal stakeholders may be less inclined to react sensitively to negative news, leading to less financial risk (Sassen et al., 2016).

To test the hypotheses, we use a sample consisting of 1942 firms-year observation of 242 firms from Argentina, Brazil, Chile, Colombia, Mexico, and Peru between 2010 and 2019. These countries were selected because they belong to the Morgan Stanley Capital International (MSCI) Emerging Markets Latin America Index, created in 1990, Which has medium and large capitalisation representation in six Emerging Market countries in Latin America (Argentina, Brazil, Chile, Colombia, Mexico and Peru) (MSCI, 2021).

We find a negative and significant relationship between environmental innovation and systematic risk. The results show that gender diversity negatively moderates the relationship between environmental innovation and systematic risk and that board independence and specific skill diversity do not moderate the relationship between environmental innovation and systematic risk. In addition, we also find a negative and significant relationship between board size and systematic risk and a positive and significant relationship between firm size and systematic risk.

This study examines the relationship between environmental innovation and systematic risk and the moderating role of board diversity. Using data from 242 firms from Argentina, Brazil, Chile, Colombia, Mexico, and Peru collected from 2010 to 2019, we employ the Feasible Generalized Least Squares (FGLS) method. We measured systematic risk by the beta index, a measure of how much the stock moves for a given market move, being the covariance of the movement of the security's price relative to the movement of the market price.

Farah, T., Li, J., Li, Z., & Shamsuddin, A. (2021). The non-linear effect of CSR on firms’ systematic risk: International evidence. Journal of International Financial Markets, Institutions and Money, 71, 101288. https://doi.org/https://doi.org/10.1016/j.intfin.2021.101288 Shakil, M. H. (2021). Environmental, social and governance performance and financial risk: Moderating role of ESG controversies and board gender diversity. Resources Policy, 72, 102144. https://doi.org/https://doi.org/10.1016/j.resourpol.2021.102144