The Impact of Greenhouse Gas (GHG) Emissions on Firm Financial Performance

The impact of greenhouse gas (GHG) emission reduction on firm financial performance is increasingly contested in prior research and there remains a lack of agreement regarding this relationship. This highlights the unanswered question of whether environmental protection investment pays off. This study investigates the association between greenhouse gas (GHG) emission and firm financial performance of 58 high-polluting companies listed on the Johannesburg Stock Exchange (JSE). The study employed a two-step system generalized method of moment (SGMM) to analyse the relationship between GHG emissions and firm financial performance. Our study reports no statistical association between greenhouse gas (GHG) emission reduction initiatives and firm financial performance of high-polluting companies listed on the Johannesburg Stock Exchange. This paper recommends that firms in high polluting intensify carbon emission reduction initiatives as a long-term investment that can improve competitive advantage and resilience to greenhouse gas emission related risks. We suggest that tax incentives and supportive regulatory mechanisms to offset the short-term financial costs associated with adoption of carbon emission reduction strategies to align firm pollution abatement practices with sustainable development goals.