When environmental action is credible: Emissions performance, environmental innovation, and firm value in the global energy sector

As climate pressures intensify, energy-related firms face growing scrutiny over whether their transition efforts reflect substantive progress or symbolic commitment. This study examines how external evaluators differentiate between two cleaner-production signals in the global energy sector: emissions-management performance and environmental innovation. Using an unbalanced panel of 2863 firm-year observations from 557 listed energy-related firms across 58 countries during 2010–2024, we estimate firm fixed-effects models with country-year fixed effects to assess within-firm associations between transition-related actions and firm valuation. The results show that higher emissions-performance scores are positively associated with firm value, indicating that observable emissions-management progress is interpreted as a more credible and decision-relevant signal of transition progress. In contrast, environmental innovation is negatively associated with contemporaneous firm value, suggesting that innovation-oriented transition efforts are initially viewed as more uncertain, costly, or difficult to verify. This negative association is attenuated in a one-year-lagged specification, and the lagged innovation signal is less discounted when management quality is high, consistent with stronger execution capacity and greater implementation credibility. The positive association between emissions performance and firm value is attenuated among older firms, consistent with legacy constraints that reduce the perceived scalability of current emissions-performance gains. Overall, the findings show that external valuation is more favorable toward observable emissions-management performance than forward-looking innovation efforts, and that the valuation relevance of environmental action depends on timing, execution quality, and organizational context.