Carbon emissions and tangible asset impairment, the moderating role of the environmental management team. Evidence from the European context

Purpose This study aims to investigate whether an increase in tangible assets impairment is associated with higher levels of carbon risk, as proxied by CO2 emissions. Beyond this relationship, the study examines the moderating role of the Environmental Management Team (EMT), which could act as a mechanism capable of enhancing a firm’s recognition of asset impairment triggers. Design/methodology/approach To test the hypotheses, a series of unbalanced OLS panel regressions was employed on a sample of publicly listed firms located in Europe that operate in heavy-pollutant sectors. The data set comprises observations from 2015 to 2023, with 1,096 firm-year observations. Findings The study finds that tangible asset impairment is not linked to high carbon risk. However, when Environmental Management Teams are present, a positive and significant effect exists: firms with an EMT display higher tangible assets impairment. These insights suggest that EMTs help firms identify impairment triggers, ensuring the more timely recognition of environmental and climate-related risks that could impact asset valuation. Originality/value This study is among the first examining the role of carbon risk and the moderating effect of EMTs on tangible asset impairment. This study sheds light on the pivotal role that EMTs play in risk management and accounting practices by reinforcing the identification of climate and environmental-related risks. In this sense, the EMTs enhance a more reliable asset values transparency, aligning corporate disclosures with environmental risk exposure.