| dc.description.abstract | This thesis investigates the relationship between environmental performance measured by emissions and financial performance in the energy industry, focusing on the link between scope 1 and 2 emissions and financial indicators such as return on equity (ROE) and Return on Assets (ROA).
Previous research explores the connection between environmental and financial performance, based on studies from the 1970s to 2017. The relationship appears mixed, with some studies finding a positive, negative, or no correlation between the two. Some research indicates that good environmental performance may lead to a market premium, while others suggest the opposite. The link between environmental and financial performance is complex, and more research is needed to fully grasp it.
Our research employs a panel data analysis using a dataset of 80 energy companies sourced from Bloomberg, with annual data from 2014 to 2021. The data encompasses variables such as scope 1 and scope 2 emissions, return on equity, return on assets, market capitalization, debt-to-equity ratio, energy sector, and industry segments. To test the hypothesis that financial and environmental performance are positively linked, our research employs various research methodologies, including pooled ordinary least squares (POLS), fixed effects (FE), and first differences (FD) models. Multicollinearity and autocorrelation are examined, and potential omitted variable and selection biases are addressed.
The findings in our study provides new insights between the effects of environmental performance, particularly between emissions and financial performance in the global energy industry with additional country and sector specific findings. Our results show no link between greenhouse gas emissions (GHG) and ROE or ROA. We find firm size and if the company originates from a high- or low-income country to be the most important factors | en_US |
