The Fading Premium: Environmental and Financial Performance Across Nordic Industries

ABSTRACT

The relationship between environmental and financial performance remains one of the most studied and least settled questions in business research. Using a panel of 741 Nordic listed firms from 2018 to 2025, we study how industry, time, firm resources, and the substance of engagement condition it. Industry determines where a relationship exists at all. Most of the economy shares no common emissions‐performance relationship, one reason pooled studies disagree; the one group that does is led by machinery manufacturing. Within industries, cleaner firms outperformed peers in accounting returns and valuation during 2018–2021. The premium concentrated in slack‐rich firms, followed financial strength rather than producing it, and attached to measured reductions rather than announced targets. After 2021 the market‐wide accounting premium is gone, a formally tested change, leaving a valuation markdown for the dirtiest firms. The payoff has changed form, from a premium for leading to a penalty for lagging.