Carbon credits and financial performance: Exploring the moderating role of CSR strategy and corporate governance practices

Climate change poses a significant challenge to humanity, requiring urgent action across all sectors of society. Globally, companies are increasingly active in their climate efforts and future mitigation commitments. This paper explores the role of Carbon Credits in climate change management, particularly focusing on their impact on financial performance. Drawing on the resource-based view theory and legitimacy theory frameworks, the study analyses a sample of global listed companies that adopted carbon credits as a strategy for emissions reduction. This study employs a Pooled Ordinary Least Squares (POLS) model to investigate the relationship between Carbon Credits and financial performance and explore the potential influence of CSR strategy and the quality of Corporate Governance as moderating variables. The findings reveal that the mitigation of carbon emissions through the implementation of Carbon Credits has a positive influence on financial performance and moderating variables play a significant role in this relationship. Furthermore, the study emphasises the potential of climate finance instruments for carbon reduction in improving financial outcomes. Corporate stakeholders may leverage these insights to integrate climate finance instruments and align sustainability with financial performance aims.