Carbon Emissions, Green Investment, and Firm Value: The Role of Integrating External and Internal Sustainability Governance Mechanisms? Evidence from the UK FTSE 350 Firms

This article discusses the influence of carbon emissions, both direct and indirect, on firm value. It also takes into account the moderating variable of green investment and whether governance mechanisms—like external assurance of greenhouse gas (GHG) emissions and CSR/sustainability committees—affect these relationships. The hypotheses of the study were developed using the lens of the natural-resource-based view, legitimacy theory, and agency theory. This paper leverages panel data spanning 2017 to 2024 on firms in the UK FTSE 350 to examine the moderating role of green investment on the linkage between GHG emissions and firm value. We then conduct sub-sample analyses for firms with and without externally verified GHG disclosures and CSR/sustainability committees, respectively. Firm value is captured using enterprise value, shareholder value, and the price-to-book ratio as alternative proxies for robustness. The results reveal that GHG emissions have a significant negative impact on firm value, while green investment mitigates this adverse effect. This impact is driven by both Scope 1 and Scope 2 emissions. However, green investments are more likely to be interpreted as genuine, durable, and value-creating when (a) the firm’s emissions data are externally verified and (b) an active CSR/sustainability committee guides and monitors implementation. This study adds to the environmental accounting and corporate governance literature by providing empirical evidence that external assurance and internal sustainability oversight strengthen the relationship between environmental responsibility and firm value creation.