Inderscience Publishers

Does green energy help firm performance?

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Courtesy of Inderscience Publishers

Environmental protection and sustainability is an emerging management topic. However, it is not easy for a for–profit firm to assign financial resources to sustainability, particularly when it hampers financial performance. We use Fortune 500 firms and examine the impact of participation in the green power partnership programme and using higher–priced clean energy on firm financial performance. Since energy is a commodity and clean energy is not different from other sources of energy usage, we argue that firms' financial performance will be hampered by purchasing green energy. However, at the same time we argue that focal firms' stock prices are positively associated with the use of clean energy due to heightened awareness of the importance of environmental protection. We find that using green energy does not hamper firms' financial performance, but we do find that firms' future potential as measured by Tobin's Q is positively associated with green energy use. We conclude by discussing the implications of these findings with respect to increased stock market performance, as well as the potential reasons for our unexpected findings with respect to financial performance.

Keywords: green energy, environmental sustainability, environmental protection, financial performance, stock market performance, corporate social responsibility, CSR, firm performance, sustainable development, green power partnership, clean energy

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