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

The global fight against greenhouse gas emission and environmental degradation calls for an increase in energy-saving strategies. Addressing the climate change issue while maintaining firm performance is increasingly essential. However, the impact of energy efficiency on corporate financial performance remains unanswered in the prior research, especially in South Africa. This study explored the impact of energy intensity on the financial performance of higher polluters in South Africa Listed on the Johannesburg Stock of Exchange (JSE) over the period 2015 to 2023. The sample for the study was 58 companies listed on the JSE. The data was sourced from the annual firm’s annual reports covering the period of 9 years (2015-2025). Two-step system generalized method of moments (SGMM) were employed to examine the relationship between energy efficiency and firm financial performance. Our study reveals no 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 impacts both firm profitability and market valuation, suggesting that debts may serve as 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.