PUBLIC UTILITIES’ CORPORATE GROWTH AND ENVIRONMENTAL CONSERVATION: EVIDENCE FROM JAPAN

This study explores how public utilities in Japan demonstrate the achievement of both growth and environmental conservation, by using financial performance and environmental impact data from publicly traded companies of power, gas, transport, telecommunication, and postal services before and during the COVID-19 pandemic. First, the regression analyses confirm the Environmental Kuznets Curve (EKC) hypothesis and an inverted N-shaped curve in 2019, 2020, and 2021. Second, the deciding factors are the result of the interaction of the following five points, which have been more encouraged and promoted in Japan in recent years: (1) regulatory reforms such as energy market opening; (2) investors’ emphasis on environment, society, and governance (ESG); (3) guidelines and assessments by economic organizations, rating agencies, and environmental nonprofit groups; (4) citizens’ professional ethics and willingness for environmental conservation and social contribution; and (5) endogenous efforts by the public utilities as members of society. Third, an approach that focuses on ESG and total shareholders return (TSR) can contribute not only to the achievement of both growth and environmental conservation but also to the expansion of the academic literature.

▪ Explanatory variables: 14 = 7 x 2 (both cases are divided and not divided by persons).
As in the dependent variables, both cases are a per staff member basis and otherwise; that is, there are 7 patterns for the former and 7 patterns for the latter, for a total of 14.
▪ The total number of regression formulas is 1,008.The breakdown is as follows; the number of linear equations is 112 = 8 (dependent variables) x 7 (explanatory variables) x 2 (both cases divided by persons and not) in 2019.The number of quadratic equations is 112 and that of cubic is 112 in 2019.The number of equations for 2019 is 336 = 112 (linear) + 112 (quadratic) +112 (cubic).The number of formulas is 336 in 2020 and 336 in 2021, respectively, the same as in 2019.So, (112 x 3) x 3 (2019, 2020 and 2021) = 1,008.
The significance level of the p-value is set at 5% (p < 0.05).Then, the regression models are as follows.
First, where CO₂ emission is the dependent variable and each variable from (1) SAL to (7) TSR is placed as the explanatory variable.
The order of the explanatory variables is the same as above, only replacing the dependent variable, while equations ( 2)-( 8) are omitted.

Results
This study's findings are as follows.First, linear regression analysis reveals significant monotonic relationships in 18, 27 and 34 cases out of the 112 cases tested in 2019, 2020 and 2021, respectively.The results illustrate a trend in which when financial performance expands, environmental impact increases.Second, quadratic regression analysis of the EKC hypothesis confirms the validity of 14 cases in 2019, 13 in 2020 and 14 in 2021.Third, cubic regression analysis of the inverted N-shaped curve confirmed the validity of 4 cases in 2019 and 2 cases in 2020 and 2021.

Table 2 Significant cases' number and percentage (%)
Fig. 1 illustrates the explanatory variables (TSR / persons) on the X-axis, while the dependent variables (CO₂ total / persons) in 2020 and 2021 are on the Y-axis, revealing that the relationship depicts an inverted U-shaped curve with the turning point.And Fig. 2 also illustrates the explanatory variable (RES) on the X-axis, while the dependent variable (ELC) is on the Y-axis, depicting an inverted N-shaped curve with the turning points.Detailed results and further discussion of their underlying factors will be provided in the 2023 presentation; as for the significant cases confirmed in the EKC and the inverted N-shaped curve, ESG-oriented investment and management should be noted.Investors' emphasis on ESG has been functioning as the compelling or driving force to advance the implementation of environmental conservation.
Especially, total shareholders return (TSR) is important.TSR is calculated based on dividends, capital gains, etc. divided by the amount invested.Moreover, firms above the 0.018-0.019level are not necessarily among the top-ranked firms in terms of net sales, but rather among the middle or low-ranked firms.Therefore, TSR can be the key to establishing the EKC hypotheses, that is, realizing environmental conservation.The emergence of the turning points in Figures 1 and 2 indicates the birth of the growth and environmental impact decoupling.The increasing TSR to thresholds, that is, JPY 0.018-0.019 in the EKC, could serve as guidelines or benchmarks for decoupling.
Finally, the disclosure of TSR has just begun with the 2019 amendment of the Cabinet Office Order on Disclosure of Corporate Affairs in Japan.Previous studies have almost never used TSR to analyze environmental data; a TSR analysis in this presentation could contribute to expanding the research frontier not only in Japan but also in other countries.

Conclusions
A TSR-and ESG-focused approach demonstrated in this presentation could contribute toward expanding the frontiers of environmental economics and industrial organization theory, and environmental conservation.Therefore, it is recommended that the academic community keep exploring the relationship between growth and environmental conservation.