Work

Driving green: Financial benefits of carbon emission reduction in companies

Year: 2024

Type: article

Abstract: This paper examines the relationship between carbon emissions reduction and company financial performance utilizing a dataset that spans 36 countries and 35 industries, which includes 14,866 observations from 2,768 companies during 2002-2022. We find a positive correlation between carbon emissions reduction and financial performance, as measured by the return on assets (ROA). This positive relationship is stronger for companies with higher carbon intensity. Moreover, countries' carbon emissions regulations are positively associated with company ROA, while ESG scores negatively impact ROA. Overall, our findings imply that companies can benefit financially by intensifying their carbon emission reduction efforts, contributing to environmental stewardship. Nevertheless, specific country and company characteristics might potentially impact these benefits. Therefore, we suggest companies adopt a diversified sustainability strategy considering industry, country-specific nuances, and regional factors.

Source: International Review of Financial Analysis

DOI: 10.1016/j.irfa.2024.103757

Authors: Banovsha Ibishova, Bård Misund, Ragnar Tveterås

Institution: University of Stavanger

Language: English

Topic: Corporate Social Responsibility Reporting

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Climate action, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,490