Corporate carbon emissions, science-based targets initiatives and firm performance: evidence from India

Abstract

Purpose

This study aims to examine the influence of corporate carbon emissions on the financial performance of select Indian companies. It further studies the moderating role of science-based target initiatives (SBTi) in this relationship.

Design/methodology/approach

The study is based on 57 Indian SBTi companies and 74 Bombay Stock Exchange-listed non-SBTi companies for the period of four years from 2019–2020 to 2022–2023. The panel data regression models are used to study this association. Furthermore, two-stage least square and generalized method of moments models are used to test the robustness of the results.

Findings

There is a negative relationship between corporate carbon emissions and financial performance. The findings support the “win-win” hypothesis and confirm that reducing carbon emissions can improve the financial performance of Indian firms. Furthermore, the SBTi moderate the carbon emission and firm performance nexus.

Practical implications

The findings of the study would provide insights to the policymakers, regulators and managers to mainstream climate change in their core business activities driving sustainability and profitable outcomes.

Originality/value

This study is a noble attempt to study the moderating role of science-based targets in the carbon emissions and firm performance nexus in an emerging market setting. Earlier studies have been conducted in a cross-country context.