Effects of climate change and technological capex on credit risk cycles in the European Union

Nawazish Mirza, Muhammad Umar, Alexandra Horobet and Sabri Boubaker

Technological Forecasting and Social Change, 2024, vol. 204, issue C

Abstract: Environmental degradation impacts businesses via both transitional and physical risks. Consequently, this can affect the repayment capacity and the default risk profile of the firms. Another factor that may impair the credit quality is the lack of technological adoption in the prevailing VUCA environment. Using a comprehensive sample of firms from the European Union, we assess the interplay of climate change, technology-related capex, and credit risk. Our findings reveal a positive relationship between emissions and the probability of default indicating a degrading impact of climate change. Similarly, we observe that firms with better environmental scores tend to have lower chances of default. Finally, we report a negative association between tech capex and default risk implying that firms that invest in technology have superior credit resilience. The results remain robust for multiple specifications of the default likelihood. We suggest that policymakers and businesses within the EU should strategically address the nexus of climate change and technology to endure more sustainable business models and financial stability within this dynamic region.

Keywords: Climate change; Technology; Default risk; Sustainability (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0040162524002440
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:204:y:2024:i:c:s0040162524002440

DOI: 10.1016/j.techfore.2024.123448

Access Statistics for this article

Technological Forecasting and Social Change is currently edited by Fred Phillips

More articles in Technological Forecasting and Social Change from Elsevier
Bibliographic data for series maintained by Catherine Liu ().