The objective of this paper is to present a dynamic analysis of the relationship between environmental (EP) and financial performance (FP). More precisely, we have analysed this relationship by considering the measurement of EP lagged by one, two, and three periods. The introduction of lagged variables at both an aggregate and non‐aggregate level, aims to capture the effects of EP on FP over time. Our results show that the aggregate measure of the lagged EP has a persistent positive effect on FP, extended over three years. This effect appears to be more marked for large size companies, for companies with low risk levels and for those spending less on investment. Results for non‐aggregate measurements reveal an asymmetric relationship between FP and KLD's concerns score, of which the impact is negative and persistent, and between FP and KLD's strengths score, where the effect is positive and limited to one year. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment