Eco-Friendly Policies and Financial Performance: Was the Financial Crisis a Game Changer for Large US Companies?

Abstract

Whether companies implementing eco-friendly policies are better immune to negative shocks in financial performance during crisis times and perform differently after the shocks remains an open question. We gather information on firms' CSR performance from the Bloomberg ESG Database, which contains environmental, social, and governance measures for thousands of companies. We build a panel dataset of large US caps included in the S&P 500 index between fiscal year 2005 and 2017. Controlling for financial health, social and governance performance, we employ seven proxies for environmental performance and look at both accounting- and market-based financial performance. We find that the existence of emission reduction or climate change policies in large US companies does not seem to be broadly associated with financial performance. Whether or not we condition the analysis on the occurrence of the 2008–2009 financial crisis, we do not observe clear-cut changes over time. Overall, we find weak evidence supporting the hypothesis that the relation between financial performance and environmental performance is specific to periods of low trust.