Corporate climate commitment effect on US firms’ financial performance: A multivalued treatment effect approach

This study examines the causal impact of corporate climate commitment, proxied by three indexes, on financial performance using 3,645 US firms for the period 2016-2021. We adopt both return on equity (accounting-based) and Tobin’s Q (market-based) measures of firms’ financial performance. Using a multivalued treatment effect approach, our results show a significant positive causal effect on Tobin’s Q, but not on return on equity. Doubly robust estimation results suggest that stronger corporate climate commitment improves stakeholders’ returns. However, we find no significant effect on performance based on shareholder equity. We therefore conduct a control function-generalized method of moments estimations to address endogeneity concerns, with further evidence that enhances the baseline results. Based on our findings, we provide recommendations to encourage corporate sustainability actions for managers and policymakers.