Companies in industries with intensive greenhouse gas emissions are under increasing pressure to balance sustainability with profitability. This study investigates the impact of environmental, social, and governance (ESG) performance on short-term financial outcomes, the return on assets (ROA), the return on equity (ROE), and trading volume in three sectors in the eurozone that have high emissions: manufacturing, transportation, and mining, refining, and power generation. Using panel data for 139 firms for the period 2008-2023 and quantile regression, we find heterogeneous effects. In manufacturing, ESG raises ROA and ROE but reduces trading volume. In transportation, ESG consistently depresses profitability, reflecting compliance costs and regulation. In energy, ESG benefits weaker firms via reputational gains but erodes performance among stronger firms because of high capital intensity and long payback periods. Our results show that ESG’s short-run financial implications are sector and firm specific, which demonstrates the need for differentiated policy and investment strategies.
Doğan et al. (Sun,) studied this question.