The pathway to a global and resilient low‐carbon economy: the interconnection between environmental preparedness and corporate financial performance

Given the imminent need of tackling climate change, companies have been forced to shift to a more sustainable business model in order to survive and thrive in the future. This thesis investigates the relationship between firms’ environmental preparedness and their financial performance, with a specific focus on the most polluting economic sectors in terms of greenhouse gas emissions. The methodology of this thesis draws upon the limitations of previous studies and covers the period going from 2011 until 2020. Even though most of the previous academic literature points to a possible positive relationship, this research finds evidence of a small negative economic effect of environmental preparedness and the implementation of environmental-related strategies on corporate financial performance. Results are robust to an instrumental variable approach employing a two-stage least squares regression model, which was utilized to tackle any possible endogeneity or reverse causality issues and draw causal inferences. Lastly, even if a small negative economic effect is observed, this one is expected to become significantly positive in the foreseeable future.