CARBON EMISSIONS AND CORPORATE PROFITABILITY: EVIDENCE FROM ASEAN-5 LISTED FIRMS

Abstract

This study examines whether corporate carbon emission intensity is associated with profitability among listed non-financial firms in the ASEAN-5 economies (Indonesia, Malaysia, Philippines, Singapore, and Thailand). The research is motivated by the region's ongoing transition toward carbon governance, including the EU Carbon Border Adjustment Mechanism (CBAM) that entered its definitive compliance phase on 1 January 2026, Singapore's progressive carbon tax, Indonesia's Emissions Trading System, and phased IFRS S2-aligned climate disclosure requirements. Drawing on carbon risk premium theory and the cost-of-compliance hypothesis, we test whether high-emission firms exhibit lower profitability and whether Scope 1 and Scope 2 emissions exert differential effects. Using an unbalanced panel of 1,912 firm-year observations from 495 non-financial firms across five countries (2019–2024) with Bloomberg emissions data, the study employs two-way fixed-effects regressions with firm-clustered standard errors. Contrary to the predictions derived from developed-market frameworks, the findings indicate that carbon emission intensity is not significantly associated with return on assets across all specifications, robust across scope decomposition into Scope 1 and Scope 2 emission intensity measures. This null finding is theoretically interpretable: during the 2019–2024 anticipation period, ASEAN-5 capital markets appear not to have fully priced carbon risk into firm profitability, consistent with shallower markets, heterogeneous carbon governance, and the absence of binding enforcement throughout most of the observation window. The results provide cross-country evidence that developed-market carbon-profitability frameworks do not straightforwardly transfer to emerging Asian markets.