Evaluation of energy efficiency impact on corporate financial performance of companies in western Europe

Abstract

Transition from fossil fuel economics to green ones is underway in the western Europe. The research paper answers whether there are potential benefits for corporate financial performance derived from increasing energy efficiency of the companies. Moreover, I extended the problem by implementing COVID19 pandemic and war in Ukraine period in the analysis. In this research paper I employed fixed and random effect model to perform analysis on 4 financial metrics: ROE, ROA, Tobin’s q and FOCF for companies in industrial, energy, basic materials and technology sectors in western Europe. The research was conducted in the period of stable energy prices (2015-2019) and fast increase in them (2020-2022) with distinction of COVID19 pandemic and war in Ukraine influence. I found that during safe times energy efficiency negatively impact corporate financial performance and during energy crises positively. The latter offset and even surpass in some cases the former.