Greenhouse Gas Emissions and Firm Performance in India: The Moderating Role of Environmental Sensitivity

Abstract

The study examines the impact of greenhouse gas emissions on the financial performance of India’s top 100 BSE-listed firms as of March 2022. It also studies the moderating role of environmental sensitivity in impacting this relationship. Greenhouse gas emissions and their components are measured in terms of their intensity per unit of sales, while financial performance is measured by Return on Assets and Tobin’s Q. Using random effects and interaction models, the analysis finds a negative relationship between emissions and financial performance, moderated by environmental sensitivity. The results highlight the need for stricter environmental regulations in India and encourage firms, especially in sensitive industries, to reduce emissions through renewable energy or improved efficiency. The study supports the “win–win” hypothesis, suggesting that reducing emissions can enhance firm performance. Future research could expand to include all listed Indian firms and those in other developing economies to gain a broader perspective.