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Carbon reduction initiatives, firm innovation and firm value

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  • Acheampong, Albert
  • Wang, Yan

Abstract

This study examines the impact of carbon reduction initiatives (CRI) on firm innovation and firm value. Using a sample of FTSE 350 non-financial firms from 2005 to 2023, we employ a novel text-mining approach to construct a CRI index and assess its relationship with firm’s R&D intensity and market valuation. Our findings reveal that firms engaged in CRI exhibit higher innovation output and enhanced firm value. Further findings reveal that carbon-intensive firms realise greater valuation benefits, whereas non-carbon-intensive firms exhibit stronger innovation-driven gains. These results remain robust to several further analysis and endogeneity tests. Our study contributes to the literature on corporate sustainability by highlighting the financial and technological implications of CRI. The findings offer practical insights for corporate managers, investors, and policymakers on the strategic advantages of integrating sustainability into corporate decision-making.

Suggested Citation

  • Acheampong, Albert & Wang, Yan, 2025. "Carbon reduction initiatives, firm innovation and firm value," Economics Letters, Elsevier, vol. 256(C).
    • Handle: RePEc:eee:ecolet:v:256:y:2025:i:c:s0165176525004501
    DOI: 10.1016/j.econlet.2025.112613
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection

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