The effect of carbon emission on financial performance of firms: An application in Borsa Istanbul – basic metal industry index

The relationship between firms' carbon emissions, environmental pollution, sustainability, and financial performance has become an important research topic in recent years. Companies aiming to reduce carbon emissions aim to create a sustainable business model in the long term by investing in environmentally friendly practices. While such environmentally friendly strategies include elements such as energy efficiency, renewable energy use, and carbon emission reduction, they can also affect the financial performance of companies. The data set for the study variables, which was conducted to determine the effect of carbon emissions on the economic performance of firms in the Borsa Istanbul - Basic Metal Industry index, covers the period 2019-2023 and consists of annual observations. Return on Assets (ROA) is used as the dependent variable in the first two models, and Return on Equity (ROE) is used in the following two models. As independent variables, Total Carbon Emission (lnCCE), the sum of the values in Scope 1 and Scope 2 (lnK1K2), Current Ratio (CO), Asset Turnover Ratio (ARR), Debt Ratio (DR), and Net Profit Ratio (nKAR) are used. In the analysis of the study, static panel data analysis was utilized, and as a result of the study, a statistically significant and positive relationship was found between firms' carbon emissions and return on assets, while a statistically significant negative relationship was found with return on equity.