The effect of nfrd compliance on european energy companies' sustainability performance

Date

2026-9-16

Author

Yahyayeva, Ayla

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This thesis compares the effects of the European Union’s Non-Financial Reporting Directive (NFRD) on the sustainability performance of the energy industry relative to other industries. While the existing literature on the NFRD predominantly focuses on cumulative ESG scores, this thesis contributes to the sustainable finance literature by evaluating the effects of the NFRD on individual ESG metrics and by comparing the responses of energy firms with those of firms operating in other industries. A multitude of ESG variables are selected to capture variation across different industries. Using firm-level panel data obtained from LSEG Workspace for 1,604 European companies, including 107 energy firms, the study applies pooled panel regressions, fixed and random effects estimations, and Difference-in-Differences (DiD) models. The results indicate that firms’ overall governance performance improved significantly. Evidence also suggests that, for certain emissions variables such as Scope 1 and emissions-to revenues indicators, the energy industry outperformed relative to others, while it underperformed relative to other industries in terms of workplace safety. Further analysis of the subsectors in the energy industry indicates that fossil fuel companies exhibited weaker emissions performance relative to other companies across all iv variables considered. A notable finding is that renewable energy firms performed even worse than fossil fuel companies, relative to firms in other industries, with respect to Scope 1 emissions. Therefore, the improvements observed in the energy sector appear to be attributable primarily to energy distribution firms, rather than to energy production firms. These findings suggest that the environmental performance effects of the NFRD are unevenly distributed across industries, indicating the importance of industry-specific responses to disclosure regulation.

Subject Keywords

NFRD, Energy Industry, Sustainable Finance, ESG, Non-Financial Disclosure

URI

https://hdl.handle.net/11511/121016

Collections

Graduate School of Social Sciences, Thesis