Abstract
We study how the business and economics literature investigates how companies’ greenhouse gas (GHG) emissions relate to their financial performance. To this extent, we undertake a meta-analysis to help us gauge the role of using highly different constructs and measurement techniques employed in this literature. Our study includes 74 effect sizes from 34 studies, covering 107 605 observations for the period 1997–2019. We establish a significant association between corporate GHG emissions and financial performance. It shows that companies with lower emissions have better financial performance. We find that the type of emission or financial performance indicator is not significant. The industry to which the firms in the sample studies belong does seems to matter slightly. We further establish that the relationship between GHG emissions and financial performance is especially pronounced for firms operating in countries with the most stringent carbon policies.
Highlights
It is well established that there is a relationship between firms’ environmental performance and their financial performance
Our meta-analysis aims to contribute to this literature from a range of perspectives: It studies the postKyoto era, focuses on the corporate level, uses greenhouse gas (GHG) emissions as a corporate environmental performance (CEP) measure, relies on a systematic selection and analysis of the sample studies, accounts for industry affiliation, and investigates whether climate policy stringency is a vector
We investigate whether the relationship between corporate GHG performance and corporate financial performance (CFP) is different for studies after firms in polluting-intense industries compared to studies that do not differentiate in this regard
Summary
It is well established that there is a relationship between firms’ environmental performance (hereafter: CEP) and their financial performance (hereafter: CFP). Meta-analysis by Orlitzky et al (2003) and Alloche and Laroche (2005) documents a significant and positive relationship between companies’ social and environmental performance and their financial performance. They observe that the research design employed significantly influences this relationship. DixonFowler et al (2013) try to bring focus and perform a meta-study on the relationship between environmental and financial performance Too, it shows there is a significant and positive association. Endrikat et al (2014) investigate both the direction of the causality and the multidimensionality of constructs They find a positive relationship between CEP and CFP, and this appears to be partially bidirectional. Lewandowski (2015) and Busch and Lewandowski (2018) relate a firm’s total carbon dioxide emissions to its financial performance and arrive at an inverse relationship between the two
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