The Impact of Carbon Emissions on Corporate Financial Performance,
Details
- Authors: Daan Loohuis
- Title: The Impact of Carbon Emissions on Corporate Financial Performance
- 1st Supervisor: Prof. Dr. Jörg Osterrieder
- 2nd Supervisor: Prof. Dr. J. Van Hillegersberg
- External Supervisor: MSc, Shelly van Erp, Capgemini
- Degree: Master of Science
- University: University of Twente
- Year: 2022
- Status: Master Thesis
Summary
Abstract
This paper is an extension of previously conducted research on the topic of the relationship between corporate environmental performance (CEP) and corporate financial performance (CFP) resulting in the main research question: “Is there a relationship between companies’ financial performance and carbon performance?.” As we are facing the biggest energy transition the world ever encountered, companies need to use their resources more efficiently than ever before. At the same time, publicly traded companies have the goal to make profits and the responsibility to create value for their shareholders. Is it still possible to be a major polluter and make a lot of money at the same time? Or do consumers and investors punish these major polluters? In this thesis, we will try to answer these questions by applying a fixed effect regression analysis to a global sample of 830 firms with data from the years 2017-2021 leading to 4150 firm years. We take the following financial performance indicators Return on assets (ROA), return on equity (ROE), and Tobin’s q (Q) as our dependent variables. For our independent variable we look at the carbon performance of companies measured by dividing the emissions by the sales, this number includes both direct and indirect emissions. The findings of this research indicate that increasing carbon emissions will lead to poorer financial performance in the short and long term. The findings can be a wake-up call for management of companies in industries that are lagging in the energy transition as they are losing money measured in profitability and in value if they are not reducing their emissions.
Important links
Data
- 830 companies active in 20 sectors
- 4150 firm years
- ROE, ROA en Tobin's Q as dependent variables
- Total GHG emissions in tonnes of CO2-equivalent
- Regression analysis
- Quantitative & Qualitative research
Data source: [1]