Chart of the WeekFirms’ Environmental Performance in Times of Crisis

2020-10-27T16:58:35-04:00October 26, 2020|

By Pierre Guérin, Fabio Natalucci, Felix Suntheim

عربي, 中文, Español, Français, 日本語, Português, Русский 

Leaders are often called upon to “rise to the challenge” in times of crisis. As firms and their leaders rise as best they can amid the ongoing health and economic crises, yet another crisis lies on the horizon. A looming environmental crisis, obscured by the exigency of the pandemic, requires action be taken by firms (and others). So how will business leaders and companies respond?

Our latest analysis looks at past episodes of financial and economic stress to gauge the likely impact of the current crisis on firms’ environmental performance.

On the one hand, the COVID-19 pandemic could increase awareness of environmental risks and bring about a shift in consumer preferences, corporate actions, and investor behavior that could accelerate the transition to a low-carbon economy. On the other hand, there is a risk that financially weakened firms, amidst heightened economic uncertainty, will reduce their investments in long-horizon, capital-intensive green projects, slowing down the transition.

Past as predictor

Looking at a large international sample of listed firms over the period 2002 to 2019, our analysis shows that the environmental performance of financially constrained firms is […]