Unveiling the intriguing connection between carbon emissions, renewable energy consumption, and performance: Evidence from NSE CNX500

• This study examines the impact of carbon emissions (CO₂) and renewable energy consumption (REC) on firms’ financial performance (ROA and ROE) and market value (Tobin’s Q and EPS). • The study analyzes 3,416 firm-year observations from the NSE CNX500 index (India) over 10 years (2011–2020), using data from Eikon Thomson Reuters and the World Bank. • Both CO₂ and REC show a consistent and significant influence on Tobin’s Q across all tests, indicating a strong link between environmental factors and firm valuation. • The study includes robustness checks by firm size and leverage, revealing that CO₂ and REC significantly affect ROE in low-leverage firms, though not in the full sample. • The findings provide critical insights for investors, fund managers, and policymakers aiming to integrate sustainability into financial decision-making. This study examines the impact of carbon emissions (CO₂) and renewable energy consumption (REC) on financial performance (ROA, ROE) and market value (Tobin’s Q, EPS) using 3,416 firm-year observations from NSE CNX500 firms (2011–2020), sourced from Eikon Thomson Reuters and the World Bank. Results show that CO₂ and REC consistently and significantly influence Tobin’s Q across all models, including by firm size and leverage. REC also significantly affects EPS in the full sample. These findings highlight the strong and persistent relevance of environmental factors for market valuation, offering important insights for investors, fund managers, and policymakers.