The Impact of Energy Efficiency on Financial Performance: Evidence from Polluters in South Africa

The global fight to mitigate greenhouse gas emissions and address climate change demands that firms implement energy-saving strategies while maintaining firm financial performance. However, the impact of energy efficiency on corporate financial performance remains underexplored, especially in South Africa. This study applied a two-step system generalized method of moments (SGMM) to explore the impact of energy efficiency on the financial performance of higher polluters and emitters listed on the Johannesburg Stock Exchange (JSE) over the period from 2015 to 2023. The sample for the study was 58 companies listed on the JSE. The data was sourced from the firm’s annual reports covering the period of 9 years (2015–2023). Our study reveals no significant association between energy-saving strategies and firm financial performance within high-polluting and emitting firms listed on the JSE. Notably, the study reports that leverage positively affects both firm profitability and market valuation, suggesting that debts may serve as a dynamic capability for improving firm performance if it is used strategically. Our findings underscore the importance of mandatory independent assurance of ESG reports to mitigate greenwashing risks.