In the Pursuit of Greenness: Drivers and Consequences of Green Corporate Revenues

Corporate revenues from environmentally friendly products and services are surging, having reached US$4.69 trillion worldwide in 2023. In this paper, I provide a comprehensive evaluation of these green revenues across countries over the 2008-2023 period. I find that foreign institutional ownership, particularly from countries with stringent environmental norms and regulations, significantly increases green revenue intensity. This correlation is further supported by evidence from index inclusions, indicating a causal relationship. Additionally, firms that tie executive compensation to ESG goals and those with gender-diverse leadership show enhanced green revenue intensity. Leveraging the EU Green Deal as a natural experiment, I demonstrate that increases in green revenues are associated with reductions in CO2 emissions and enhancements in environmental policies and profitability. These effects are mostly concentrated in carbon-intensive industries. Overall, these findings highlight how environmental considerations are integral to shaping corporate strategies and illustrate the pivotal role of institutional investors in fostering the green transition.