Effects of environmental pro-activeness on financial performance in South Africa: short panel vector autoregressions analysis

Employing impulse response function analysis in short panel vector autoregressions, we examined the response of financial performance proxies namely return on asset, return on sale, equity returns and market value of equity deflated by sales to shocks in environmental pro-activeness, measured by energy usage intensity and emissions intensity of JSE's SRI firms for the period 2008-2014. The results showed that while financial measure, return on asset responds negative to shocks in environmental pro-activeness, measured by energy usage intensity in the first four years, the financial measure tends to respond positive to shocks in environmental pro-active measured by emissions intensity at each time responsive period. On the contrary, return on sale tends to show negative response to shocks energy usage intensity at each time responsive period, but a positive response to shocks in emissions intensity in the first 2 years and the last 2 years. Furthermore, the paper found that shocks in 'end of pipe' activities value drives equity returns only in year 1. Shocks in 'prevention' and 'end of pipe' activities seemed to show value destroying tendencies on market value of equity deflated by sale at each time responsive period.