Impact of corporate governance on corporate environmental performance: Does Green Finance matter?

Abstract

This study investigates the impact of corporate governance on Corporate Environmental Performance (CEP) in manufacturing firms listed on the Pakistan Stock Exchange from 2013 to 2019, with a particular focus on the role of green finance. Using a sample of 308 conventional manufacturing firms, approximately 75% of the sector's total population, the study applies Fixed Effects and Generalized Method of Moments (GMM) estimation techniques to assess the data. The results reveal that while Audit Committee Independence significantly enhances CEP, Audit Committee Size has minimal impact. CEO Compensation positively influences sustainability efforts, whereas Director Compensation is negatively associated with CEP, indicating a potential misalignment with environmental objectives. Ownership structure analysis shows positive effects of Institutional and Foreign Ownership on CEP, while Family, Insider, and Block Ownership negatively affect environmental outcomes. The findings underscore the importance of integrating green finance and carbon accounting into governance frameworks to enhance sustainability initiatives. This integration aligns with Sustainable Development Goals (SDGs) 12 (Responsible Consumption and Production), 13 (Climate Action), and 17 (Partnerships for the Goals). The study’s findings have important implications for policymakers and corporate stakeholders, advocating for governance strategies that balance financial and environmental performance, and fostering independent oversight for improved environmental sustainability.