The Impact of carbon emissions on market performance: fintech versus non-fintech

Abstract

This study aimed to examine the impact of Scope 3 carbon emissions on market performance and the moderating effect of financial technology (fintech) on this particular relationship. Empirical data on Scope 3 carbon emissions from 2010 to 2022, which covered both fintech and traditional (non-fintech) financial firms, were collected from Bloomberg. All data were subjected to ordinary least squares (OLS) regression. Generalised method of moments (GMM) was performed to deal with potential endogeneity issues. The significant negative relationship between Scope 3 carbon emissions and market performance in this study implied investors’ concerns about the environmental impacts. With the noticeably lower carbon emissions, indicating the adoption of an eco-friendly orientation, fintech financial firms demonstrated positive relationship between their market performance and Scope 3 carbon emissions. Meanwhile, the results revealed otherwise for non-fintech financial firms. It is recommended for future research to consider the qualitative approach, such as structured or semi-structured interviews, to further validate the quantitative results of the current study. This study demonstrated the significant role of fintech financial firms in environmental stewardship, specifically with their markedly lower Scope 3 carbon emissions. Their approaches and practices can benefit ESG implementors in designing and implementing more effective and responsible operational models. Despite the current global challenges, particularly after the COVID-19 pandemic and the growing environmental awareness and concerns, this study commended the sustainable approaches of fintech financial firms, which served as a benchmark for ESG initiatives. This can potentially boost their ESG ratings and market standing. To date, the relationship between Scope 3 carbon emissions and market performance and the moderating role of fintech on this relationship have remained underexplored, which were addressed in the current study.