Crude Oil - Does Green Mean Golden?

Abstract: Sustainability has become an urgent issue for business research. In this regard, many researchers attempted to examine the relationship between sustainability performance and corporate financial performance (CFP). However, the results remain unclear. Thus, this paper contributes with a new perspective on intra-industry performance of the poorly-studied North American oil and gas industry. Using multiple linear regression models, the relationship between the Refinitiv ESG score and corporate financial performance is examined. The authors find no association between ESG score and accounting performance, measured in Return on Assets. However, a significant association of ESG score and tobin’s q, as a measure of market performance, is found. In a second step, the authors examine which of the three individual ESG pillars’ association with CFP is the strongest. The models suggest ESG pillars, when considered separately, do not show a statistically significant relationship with neither accounting nor market-based measures. The study concludes that investors might value sustainability while sustainability’s association with corporate efficiency might be negatable. Based on this, future research is suggested to focus on analyzing panel data to examine change in these relationships.