Green Revenues, Greener Margins: The Global Financial Impact of Eco-Friendly Products

I examine revenues from eco-friendly products and their impact on corporate profitability and environmental policies in a large cross-country sample. Following multiple quasi-exogenous shocks to eco-friendly revenues, which reached $4.7 trillion in 2023, (1) firms improve profitability, enhance cash flows, and reduce CO2 emissions, and (2) profitability effects are stronger during economic downturns and in countries with greater climate vulnerability and climate risk awareness. Socially-oriented institutional investors significantly boost sustainable revenue generation, while managerial incentives show limited impact. These findings highlight the importance of sustainable revenues in aligning financial gains with environmental goals and adapting to evolving consumer preferences.