The dual impact of carbon emissions and financial performance

Abstract

This thesis examines the relationship between carbon emissions and financial performance in Asian markets, employing Panel Vector Autoregression (PVAR) and pooled Ordinary Least Squares (OLS) regression. The study utilizes a comprehensive dataset covering firm-level data from 2007 to 2022, allowing for a robust analysis of the complex relationships between environmental and financial factors. The findings provide weak evidence for a carbon premium, suggesting that investors may demand higher returns from firms with high carbon emissions to compensate for environmental risks. Additionally, the results indicate that emission-intensive firms may face financial risks, as higher emission intensity is associated with increased leverage. However, other financial metrics, such as Return on Assets (ROA) and Market-to-Book Ratio, show inconsistent relationships with carbon emissions. These results highlight the challenges of reducing emissions and their limited influence on financial outcomes in emerging markets where regulatory pressures and market dynamics differ significantly from those in advanced economies. The study underscores the importance of tailored regulatory frameworks and strategic investments in sustainability, offering insights for policymakers and firms trying to find the golden path between environmental and financial goals.

Date of Award	31 Jan 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Zoe Venter (Supervisor)