Summary :
Abstract
This study examines the effects of Climate Change Exposure (CCE) on financial performance using a panel of 556 firms operating in 24 Mediterranean countries, observed over the period from 2001 to 2022. Using linear regression analysis, we find that CCE significantly impacts three measures of financial performance: Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q. Furthermore, Environmental Performance moderates this relationship.
By splitting our sample according to pollution levels (less polluting versus more polluting firms), the results indicate that industries with higher pollution levels face more severe consequences on financial performance due to their exposure to climate risks. Additionally, the study highlights a more pronounced impact of CCE during the post-Paris Agreement period. This suggests an increase in companies’ sensitivity to climate risks after 2015, potentially attributed to the implementation of stricter environmental regulations and increased compliance pressures.
These findings carry significant implications for firms, policymakers, and investors in the Mediterranean region. This research contributes novel insights to the field of climate change.