This study provides empirical evidence related to the "it pays to be green" hypothesis. Based on information from panel data approximately 42 industrial companies during an 8-year period, we determine some of the factors and contingences that affect the fulfilment of that hypothesis. We find that a certain level of proactivity in environmental strategy design is one of the conditions that favors a positive relationship between environmental investment and financial performance. We also provide empirical evidence on how some external conditions affect this positive relationship, such as regulatory pressure from the European Union Emissions Trading System (EU ETS) and the financial crisis.
Keywords: European Union’s Emissions Trading System; contingent theory; environmental proactivity; financial crisis; financial performance.