The purpose of the correlation analysis is to meet the specific objective of verifying the existence of a correlation between the scores for the Environment and Climate Change dimensions and financial performance. Table 2 presents the correlations between the variables. The categorization of correlation strength was based on the classification proposed by Schober, Boer, and Schwarte (2018). To control the Type I error rate (false positives), Holm’s post hoc adjustment was applied.

Table 2
Pearson correlation analyses between environmental and financial variables

Source: Research data.Note: * = p < 0,05; ** = p < 0,01.

Based on the correlation coefficients (r), the environmental variables showed a positive and significant association of weak magnitude only with the financial indicator ROE (Environment: r = 0.29, p < 0.01; Climate Change: r = 0.20, p < 0.01), with no other statistically significant correlations identified between the financial and environmental variables. Moreover, most financial indicators were found to be correlated with each other, as were the environmental variables, which showed a positive correlation of moderate magnitude (r = 0.42, p < 0.01). Thus, H1 of this study was partially confirmed, indicating a positive and statistically significant relationship between the environmental dimensions of the ISE and a single financial indicator, ROE.

The low magnitude of the correlation identified, as well as the absence of statistical significance between the performance of the environmental dimensions and the other financial indicators, may be associated with temporal gaps in the relationship between these variables. This suggests that the relationship may not necessarily manifest simultaneously, meaning that variations in environmental performance may be reflected in financial performance over longer periods. This may also indicate an emerging nature, in many respects, of the relationship between financial and environmental performance, a pattern also observed in recent systematic and comprehensive reviews of the international literature (Chowdhury et al., 2023).

4.1.2 Impact of the performance in the Environment and Climate Change dimensions on Return on Assets (ROA)

The results of the multiple linear regression analysis (enter method) for the first regression model, which used the financial performance variable ROA as the dependent variable (DV) and the performance in the Environment and Climate Change dimensions as the independent variables (IVs), considering a 5% significance threshold for p, showed no statistically significant influence of the performance in the Environment and Climate Change dimensions on the ROA of the listed companies (F(2, 225) = 2.58, p > 0.05; R²_adjusted = 0,014).

Furthermore, based on the Coefficient of Determination (R²), it is estimated that only 1.4% of the variation in ROA performance can be explained by the scores of the Environment and Climate Change dimensions of the ISE. Table 3 presents the coefficients for all predictors.

Table 3
Predictor variables of the financial performance variable ROA

Source: Research data.Note: * = p < 0,05; ** = p < 0,01.

Despite the absence of a statistically significant influence of the model, the dimension-level analysis revealed a statistically significant and positive influence of the Environment dimension on the ROA of the companies analyzed, indicating that a 1-point increase in the Environment IV leads to a 7.07-point increase in ROA (Environment: b = 7.07, p < 0.05).

Regarding the influence of environmental variables on financial indicators, it should be noted that the model as a whole, which incorporates the Climate Change dimension, did not present statistical significance, indicating no impact of the combined effect of the dimensions on corporate financial performance. Current climate challenges are urgent and unprecedented, and corporate strategies have not demonstrated sufficient capacity to address this global problem (Braunerhjelm & Hepburn, 2023).

The difficulty in consolidating effective practices aimed at reducing GHG emissions and consequently decreasing the frequency and intensity of climate change effects is linked to the growing global patterns of consumption, which increasingly demand higher levels of production and the supply of goods and services. In addition, emphasis on improving corporate practices for climate change mitigation has focused on energy transition, which, according to recent evidence, has not shown sufficient capacity to meet the rising demands of production (Arteaga et al., 2023; Murphy, 2024).

Efforts to improve resource efficiency, including those present in the ISE’s main environmental performance practices such as water and energy management, as a strategy to address global warming, may produce an adverse effect. This occurs when focus is shifted away from reducing consumption patterns toward seeking the use of clean energy, which remains insufficient to meet global consumption standards, potentially encouraging increased demand justified by the energy transition (Arteaga et al., 2023; Murphy, 2024).

Conversely, the individual, positive, and significant impact of the Environment dimension (Environment: b = 7.07, p < 0.05), which has a broader environmental scope, may indicate that corporate investment in improving water, energy, and waste management strategies, along with other environmental management practices, positively influences the efficiency of asset utilization measured by the ROA performance indicator. Superior environmental performance can positively affect asset use efficiency, and consequently ROA, through a range of mechanisms, with particular emphasis on resource use efficiency (McCarthy et al., 2010; Wang et al., 2024; Zhang, 2021).

4.1.3 Impact of performance in the Environment and Climate Change dimensions on Return on Equity (ROE)

Unlike the first case, the results of the multiple linear regression analysis (enter method) for the second regression model, which used the financial performance variable ROE as the dependent variable (DV) and the performance in the Environment and Climate Change dimensions as the independent variables (IVs), also considering a 5% significance threshold for p, revealed a statistically significant joint influence of the environmental dimensions on the ROE of companies listed in the ISE (F(2, 225) = 11.60, p < 0.01; adjusted R² = 0.085). Based on the Coefficient of Determination (R²), it can be inferred that 8.53% of the variation in ROE performance can be explained by the scores of the Environment and Climate Change dimensions. Table 4 presents the coefficients for all predictors.

Table 4
Predictor variables of the financial performance variable ROE

Source: Research data.Nota: * = p < 0,05; ** = p < 0,01.

As in the previous case, only the Environment dimension showed a significant and positive influence on the financial variable ROE. It was found that a 1-unit increase in the performance of the Environment IV leads, on average, to a 13.99-unit increase in ROE performance (Environment: b = 13.992, p < 0.01). The findings from this stage of the study indicate that the environmental dimensions significantly and positively affect only specific financial indicators. This can be explained by the fact that financial indicators represent different aspects of financial performance, which is a broader concept. Thus, H2 of this study was also partially confirmed.

The dimension-level analysis showed that this influence stems from the impact of the Environment dimension on the ROE of listed companies. As will be shown below, the other profitability and return indicators did not demonstrate a significant effect from the environmental performance dimensions of the ISE. The impact of environmental performance on the ROE indicator, as opposed to the absence of impact on ROI (a return indicator) and on the three profitability indicators analyzed, can be explained by the nature of these financial variables and the characteristics of the practices considered in measuring environmental performance by the ISE, as detailed below.

ROE is directly related to equity, whereas ROI and profitability indicators use revenue or total assets as the denominator. Therefore, considering that the ISE’s environmental criteria focus on resource-use efficiency and cost reduction rather than revenue generation, the impact on ROE which is directly influenced by equity, a balance sheet account directly associated with net income (profit or loss) can be justified (Cornellissen & Mukwarami, 2024).

Moreover, although the other indicators are also associated with shareholders, ROE is directly linked to investors’ decision-making process, as it reflects the relationship between equity (investors’ capital) and profit generation (return on shareholders’ invested capital), metrics that are associated with corporate environmental performance and environmental management practices in general (Cornellissen & Mukwarami, 2024). It is also noteworthy that the influence of environmental performance on ROE was found in other recent studies analyzing the impact of environmental dimensions on corporate financial performance (Ismail & Azman, 2024).

The findings from this stage of the study reinforce evidence from previous research, initially by aligning with most studies on the relationship between financial and environmental performance, showing that it is profitable for companies to improve their environmental management practices. However, despite this, the influence of environmental practices on financial performance does not reveal consensual results and remains subject to divergences (Baah et al., 2021; Grisales & Carucael, 2021; Xie et al., 2019; Feng et al., 2018; Li et al., 2017; Donohue & Torugsa, 2016; Cavaco & Crifo, 2014; Endrikat et al., 2014).

It can therefore be stated that the financial and environmental performance of companies listed in the ISE are indeed related and that, while considering the specific nature of each financial and environmental indicator, environmental performance has a significant impact on corporate profitability. Environmental performance affects profitability through a series of mechanisms, including improving levels of green innovation, reducing financing constraints linked to environmental issues, increasing revenue, and enhancing competitiveness and reputation. Companies that achieve superior environmental responsibility performance can increase profitability by attracting investors and consumers through an improved corporate image (Hu & Zhao, 2024).

Nevertheless, the low magnitude of the correlation coefficients and determination coefficients indicates that the explanatory power of environmental performance for financial performance remains incipient, once again revealing the complex and, in many respects, emerging dynamic of seeking harmony between profit generation and environmental protection. The other regression models, considering the financial indicators ROI, NPM, GPM, and MEBITDA, did not show significant results. The low explanatory power of environmental variables over financial variables may indicate an emerging scenario in which environmental performance has not yet fully demonstrated its capacity to influence corporate financial outcomes. In a broader scope, it may also reflect the global corporate context, which is still striving to reconcile financial objectives with environmental preservation, a complex task surrounded by debate and contradictions.

The first participating company was listed in the ISE during the years 2021 and 2022. It belongs to the Basic Materials/Chemicals/Petrochemicals sector classification, with its main activity being the production of chemical products and an annual revenue in the 2023 fiscal year exceeding seventy billion Brazilian reais. For all purposes, it will hereafter be referred to as Company “A”.

The second company was listed in the ISE throughout the entire analysis period, from 2021 to 2023. It belongs to the Communications/Telecommunications sector classification, with its main activity being the provision of telecommunications services and an annual revenue in the 2023 fiscal year exceeding fifty billion Brazilian reais. It will be referred to as Company “B” in the reporting of results. The summarized data are presented in Table 5.

Table 5
Summary of companies participating in the qualitative stage

Source: Research data.* Values in R$ 1,000 (thousand Brazilian reais), rounded to three decimal places. The values are presented approximately in millions of Brazilian reais to preserve the anonymity of the companies.

As shown in Table 5, both companies recorded annual revenues in the tens or hundreds of billions of Brazilian reais throughout the analysis period, with Company A reporting losses in the last two fiscal years and Company B reporting profits throughout the entire period. Table 6 presents a summary of the interviewees. For all purposes, the interviewee from Company A will be referred to as Interviewee A, and the interviewee from Company B as Interviewee B.

Table 6
Summary of interviewees

Source: Research data.

The following section of the study will present managers’ perceptions regarding the relationship between environmental and financial performance, the impact of environmental performance on financial performance, the controls used to assess financial and environmental performance, financial performance as a determining factor in setting the level of environmental investments, and the importance of financial viability in decisions on environmental investments.

Initially, the interviewees were asked about their perception of the relationship between financial and environmental performance in the corporate context. Interviewee A expressed the view that, during the processes carried out by companies, environmental, social, and economic impacts are interconnected, demonstrating a belief that corporate processes have both positive and negative impacts on the environment, on society, and on the economic situation of companies, as evidenced in the following transcript:

Interviewee A: “Look, they are completely related because nowadays, when you are carrying out any activity or process, it has positive and negative impacts economic, environmental, and I would also say social so there is no way to separate them.”

In line with Interviewee A’s response, Interviewee B stated that they consider financial and environmental performance to be related and that making the effects of this relationship tangible is a challenge for the corporate environment today, as shown in the following excerpt from the interview:

Interviewee B: “Yes, I think the challenge for all companies today, and for sustainability areas in general, is to be able to make this tangible for the company. But internally, we already have cases of both cost reduction and revenue generation linked to improvements in our overall sustainability agenda, including environmental issues.”

Interviewee B provides a series of examples that highlight the relationship between financial and environmental performance, citing cost reduction and revenue generation. Furthermore, by pointing out the tangibility of the effects of the relationship between financial and environmental performance as a challenge for the corporate environment, Interviewee B presents a view that reflects one of the motivating factors for this study—the uncertainties that still surround the impacts of environmental performance on financial performance. Such uncertainties may stem from successive subjective narratives that have contributed to inconsistencies in the findings on this relationship, creating challenges for companies in quantifying this impact and in understanding the complex nature of tangible financial results that arise from, or are partially influenced by, environmental initiatives (Amarasuriya et al., 2024).

The challenges to making this relationship tangible include a variety of factors, ranging from the lack of standardization in environmental reporting which hinders comparisons between different companies to the high costs of implementing structured environmental management practices, low awareness in many cases, and difficulties in communicating the benefits of environmental investments to the various stakeholders involved (Harif & Natasha, 2024). Moreover, environmental performance may, in the short term, generate costs that outweigh immediate financial benefits, which only become more tangible in the long term. This makes it even more difficult to demonstrate these benefits at the outset (Zhang & Chen, 2017).

The second question asked the interviewees about the impact of environmental performance on financial performance, specifically whether improvements in environmental performance could lead to improvements in financial performance. Both interviewees stated that they believe enhanced environmental performance can positively impact financial performance, as evidenced in the following transcripts:

Interviewee A: “Naturally, because, well… inevitably… this result comes, even helping, you know, the business to endure. […] Society itself, the client, the consumer, ends up becoming more discerning and begins to include these criteria in their choices of products and services. So naturally, when you improve your environmental performance and make this clear, associating it with your product or service, the financial return certainly follows.”

Interviewee B: “Yes, we go from a stage that I think is where most companies began working, which is mitigating legal and regulatory risks… and all of these are linked to some financial figure due to fines or compliance adjustments. So, for us, there is already a high level of maturity in this area.”

Despite agreeing on the positive impact of environmental performance on financial performance—a perception that corroborates the quantitative stage of this study—the interviewees attribute this influence to different aspects. Interviewee A, focusing on external factors to the company, emphasizes the role of environmental practice disclosure in improving corporate image, with subsequent financial gains resulting from enhanced reputation and added value of products. This finding is consistent with Legitimacy Theory, which encompasses a body of studies showing that the pursuit of legitimacy through environmental disclosures has effects on financial performance (Gholami et al., 2022; Lee & Raschke, 2023).

Interviewee B, in turn, highlights aspects more related to internal factors within the organization, such as the mitigation of regulatory risks and the financial benefits of adopting circular economy practices and energy transition initiatives, both associated with the ISE environmental dimension. As evidenced in the document analysis stage of this study, circular economy practices and the pursuit of energy transition are fundamental factors for corporate environmental performance, with significant effects on financial performance (Guirk et al., 2019; Liu et al., 2018).

When asked how corporate policies focused on the environmental agenda take financial aspects into account, the interviewees presented an integrated view of financial aspects and environmental policies. Interviewee A emphasized the need to integrate the environmental agenda into the business strategy, stating that only in this way can financial aspects be properly related.

Interviewee A: “The company will consider financial aspects in the environmental agenda when this environmental agenda is part of the business strategy. The company has only one strategy the business strategy. Sometimes we say there is a sustainability strategy, but that needs to be corrected because there are not two strategies in a company; it makes no sense. When you talk about a sustainability strategy, you are talking about the sustainability aspects and attributes of your business strategy. […] So today, a robust strategy given that studies already show that the impact of climate risks will be one of the most relevant impacts in the short term and is already materializing when thinking about economic performance, must identify these impacts as well as the opportunities. And, as with any strategic planning process, it must calculate the potential positive and negative impacts and incorporate them into the strategy.”

Interviewee A emphasizes the importance of a business strategy that incorporates environmental aspects so that environmental performance can be assessed in an integrated manner with the company’s financial performance. He also states that robust business strategies consider environmental and financial aspects within a single planning process, as it is not feasible to address them separately.

Business strategies that integrate environmental and financial aspects into business decision-making gain a competitive advantage, improving environmental performance with positive effects on corporate financial performance, business sustainability, market value, and long-term profitability (Tan et al., 2022). Corporate sustainable development is directly associated with the capacity of corporate management systems to integrate environmental and financial criteria (Hristov et al., 2022).

Similarly, the statements of Interviewee B align with those of Interviewee A, treating financial aspects as being “linked” to corporate environmental policies, with emphasis on the risks and opportunities arising from this complex dynamic, which is fundamental to the survival of companies.

Interviewee B: “Yes, we will have policies that are indeed tied to indicators that will directly impact the financial side. […] For example, when we look at our environmental policies, all of them address risks and opportunities, and for us, all financial aspects are linked to risks and opportunities. So, our own governance policies include risk management, in which we also estimate the financial impacts of risks and opportunities, and today sustainability is included as a criterion within this framework. […] So, to summarize, this exists both within specific sustainability policies and within processes that are transversal across the company.”

Interviewee B shows that financial aspects are considered in corporate environmental policies insofar as the risk and opportunity analyses of these policies are directly associated with financial matters, and that sustainability itself is a criterion in estimating the financial risks and opportunities within the company’s governance policies. There is empirical evidence regarding the impact of environmental performance on production costs, business value, and returns, which are associated with a range of risks and opportunities (Gasbarro et al., 2017).

In the second question of this stage of the interview, respondents were asked whether the company had controls in place capable of assessing the relationship and impact between financial and environmental performance. Both interviewees stated that such controls exist within their companies. Interviewee A cited as an example the internal pricing of carbon emissions as a way of preparing for the future regulatory environment.

Interviewee A: “For example, in our investments related to climate and emissions, we have an internal carbon pricing process. So, we look at the entire process whether it increases or reduces emissions and when we calculate the NPV, we assess how many emissions it reduces. We have an internal price because it is a way to prepare for the future regulatory environment. So, we are already preparing along those lines, because if you want to think about the perpetuation of your business in the medium and long term, you need to have a strategy that takes these aspects into account.”

Meanwhile, Interviewee B provided three distinct examples: process digitalization, equipment recycling, and improvements to site systems. Subsequently, Interviewee B highlighted the integration of environmental and financial objectives as a strategic pillar of the company in which they work, with emphasis on the financial results arising from initiatives that are, in essence, environmental in nature.

Interviewee B: What I find interesting in this regard is that these are projects with a huge socio-environmental context, but when they go to the SDG, they are 100% business what the project is and what efficiency it is delivering. That is why I distinguish it, because it is much closer to the answer you want. It is not a department trying to show benefits for itself in relation to a socio-environmental project; it is the business area itself quantifying and monitoring this. So, it is finance driving this agenda.”

From the opening excerpt of Interviewee B’s statement, it is evident that the topic carries a certain sensitivity, while there is already recognition of the financial impact of these practices, as demonstrated by the experienced financial benefits of the environmental initiatives mentioned. Furthermore, in Interviewee B’s view, although these initiatives have a significant positive socio-environmental impact, for corporate governance policies they are purely business, with the primary assessment focusing on the financial benefits derived from these programs. The financial results are quantified and monitored, even though their initial scope has an environmental prerogative as its justification.

The statements of both interviewees, particularly those of Interviewee B, show that the environmental agenda in the organizational context goes beyond socio-environmental issues and also represents opportunities for generating financial benefits. This once again corroborates studies that indicate a positive relationship between these constructs and highlights the central role of environmental management in today’s business landscape (Feng et al., 2018; Garcia et al., 2022; Li et al., 2017; Xie et al., 2019).

Finally, the interviewees were asked to assess the importance of environmental investments for the company and, if possible, to comment on notable environmental investments. Interviewee B had already mentioned a series of initiatives, while Interviewee A presented initiatives of high environmental value and with financial impacts that are currently being developed by the company, followed by a brief reflection on the importance of these initiatives by Interviewee B.

Interviewee A: “Right, look… here within our business, and since we are in the plastics value chain, our top priorities are related to climate and post-consumption waste, oceans, plastics, and so on. So, we have been investing specifically in advancing plastics management along the value chain, even creating new recycling businesses that enable the practice of recycling mechanical, energy, and chemical recycling. […] Regarding climate, we also have a series of actions to reduce our environmental footprint. We have a commitment to be carbon neutral by 2050, and we are one of the world’s largest producers of sugarcane-based polyethylene. So, we are investing in evaluating our portfolio to transition from fossil-based to renewable sources, precisely as a strategy for ensuring the perpetuation of the business.”

Interviewee B: “When a company engages in more sustainable actions, even if it is not the silver bullet, ‘Oh, the ISE is not the silver bullet for what makes a company sustainable’ the same will happen with regulation. But when it joins this broader agenda, it is able to focus much more and understand how much it can achieve. Having a robust sustainability strategy will precisely shift its power within its sphere of influence, and I think this is the key point: the moment when all those investments, which often may seem to be for the product itself or for shareholder returns, start to gain layers of impact on economic development, sustainable development, and, indeed, even if the company does not change its business model, it is able to understand and enhance what has a positive impact for it and justify that investment which I believe is the big difference.”

These final responses show that companies have made positive progress in implementing and recognizing the importance of the environmental agenda for the sustainability and perpetuation of their businesses, including an awareness of the financial impact generated by corporate environmental performance. “Justifying the investment,” as stated by Interviewee B, may be the key idea at this moment.

Beyond the socio-environmental benefits and the imperative need to reshape business models into circular, sustainable, and environmentally ethical structures, environmental management also constitutes a powerful business strategy. It incorporates risk reduction and opportunity capture in building more competitive companies aligned with the global environmental requirements of corporations, governments, and modern societies. Overall, managers’ perceptions of the impact of environmental performance on financial outcomes highlight a growing integration between these dimensions in corporate strategies. The following section presents the final considerations of the study.