Carbon performance and corporate financial performance during crises: Evidence from the COVID-19 pandemic and the Global Financial Crisis

Economic crises offer a valuable perspective on the relationship between carbon performance and corporate financial performance (CFP). Crises test corporate performance and challenge the allegedly universal synergies that developed under “normal” circumstances. However, the current research in this area is limited and has often yielded insignificant results. Drawing from a global dataset spanning 15 years, we investigate the moderating influences of two distinct crises on the interplay between carbon emission intensity and CFP. Employing fixed-effects regression analysis, we dissect these critical periods, offering nuanced insights into their distinct impacts. The contrasting nature of the Global Financial Crisis (GFC) and the COVID-19 pandemic is central to this study. The COVID-19 pandemic, characterized by operational disruptions and natural resource scarcities (supply-side shock), significantly amplified the benefits of carbon reduction strategies, highlighting the value of efficient processes and cost efficiencies. In contrast, the GFC did not exhibit a significant impact on the carbon–CFP relationship. This differentiation is attributed to the GFC's finance-driven nature (demand-side shock), and the resultant evolution in stakeholder preferences and organizational structures. This study extends beyond the debated territory of environmental, social, and governance (ESG) scores. It also provides a nuanced understanding of carbon performance's role subject to the unique characteristics of a crisis.