Ecological Economics · 2020 · 252 citations · 73 references
ManagementEnvironmental ManagementCarbon ManagementEnvironmental EconomicsProduction EconomicsCarbon Emissions AccountingCarbon Risk ManagementEnvironmental Performance MeasurementGreenhouse Gas AccountingProductivity AnalysisResource EfficiencyCarbon DioxideCarbon Efficiency AnalysisFinancial Performance ImpactFinancial Performance PerspectiveOperational Carbon EfficiencyProductivityResource Efficiency MeasurementTotal Factor Productivity
International policy actions to constrain carbon emissions create substantial risks and opportunities for firms. In particular, production processes that are relatively high emitting will be more sensitive to the uncertain costs of emitting carbon dioxide and might further reflect productive inefficiencies. We employ a productive efficiency model to evaluate firms' carbon emission levels relative to those of best-practice (efficient) peers with comparable production structures. By accounting for total factor productivity and sector-relative performance aspects, this measure of carbon efficiency helps to quantify and rank firms' relative dependence on carbon in the production process. We investigate the impact of carbon efficiency on various financial performance outcomes and evaluate the role of general resource efficiency in explaining these impacts. Using an international sample of 1572 firms over the years 2009–2017, we find superior financial performance in carbon-efficient (best-practice) firms. On average, a 0.1 higher carbon efficiency is associated with a 1.0% higher profitability and 0.6% lower systematic risk. While carbon efficiency closely relates to resource efficiency, it also has distinct financial performance impacts, particularly lowering systematic risk. Overall, our findings suggest that carbon-efficient production can be valuable from both operational and risk management perspectives.
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Sample Selection Bias as a Specification Error
James J. Heckman · Econometrica · 1979 · 28.9K citations
Common risk factors in the returns on stocks and bonds
Eugene F. Fama, Kenneth R. French · Journal of Financial Economics · 1993 · 27.7K citations