Green investment and firms' financial performance

Abstract

Globally, more firms are adopting green investment for various reasons like driving revenue, adhering to regulation, or truly conserving the environment. However, firms often encounter challenges in understanding various green investments which can be risky and have either impeded their motivation or caused them to invest inappropriately. Previous studies have also used different measurements of green investment in relation to firms’ profitability resulting in mixed outcomes. Therefore, this paper aims to fill the gap in the literature by addressing the problem through identifying four key Green Strategies such as ISO 14000, Green Processes, Pollution Prevention, and Green Certification, and the mediating effect of Green Image using the existing literature, followed by determining the most lucrative green strategy. Data are collected from the Singapore Exchange Limited (SGX), Fitch Connect, and firms’ websites to observe the effectiveness of each green strategy on the firm’s financial performance using Multiple Linear Regression (MLR) and Moderated Multiple Regression (MMR). Two out of four strategies are found to have significant positive effects on firms’ performance with Green Processes being the most effective green strategy. Green Image is found to be statistically insignificant.