The inclusion of environmental factors in the financing/investment strategies of financial intermediaries and climate-related risks management

This dissertation investigates how climate-related and environmental factors are internalized within financial and investment systems, contributing to the broader understanding of sustainable finance in a transitioning global economy. As firms and financial institutions face increasing pressure to integrate carbon risks and ESG metrics, this research offers four empirical studies that examine the financial consequences, market reactions, and governance dynamics of climate-related strategies. The first paper, Are Circular Economy Strategies Economically Successful?, analyzes a global panel of resource-intensive firms from 2010 to 2019, assessing the impact of circular economy (CE) practices on profitability, market valuation, and cost of debt. Using a firm-level CE score, the study finds that CE engagement enhances accounting and market-based performance, particularly after the 2015 Paris Agreement. Eco-design, take-back systems, and waste reduction emerge as the most effective strategies. The paper highlights a growing alignment between environmental responsibility and financial success. The second paper, Just 'Blah Blah Blah'? Stock Market Expectations and Reactions to COP26, applies event study methodology to examine abnormal returns around the COP26 climate conference. Contrary to expectations, the results show muted or inconsistent market reactions, especially among high-emitting firms. This suggests a disconnect between climate policy announcements and investor expectations, raising concerns about the credibility and transmission of global climate commitments. The third paper, The Influence of External Contextual and Firm-Specific Stakeholder Voices on Banks’ Greenwashing, explores greenwashing behavior in European banks. Combining panel data with quantitative content analysis of sustainability reports, the study finds that external stakeholder pressure increases reporting but may incentivize symbolic rather than substantive actions. The findings underscore the reputational dynamics of sustainable finance and the limitations of voluntary disclosure regimes in curbing climate-related misrepresentation. The fourth paper, Decoding Company Mitigation Pathways: how peer influence, financial performances, and sustainability achievements shape decarbonization commitments ‘decisions to commit to the SBTi initiative investigates corporate decisions to engage with the SBTi framework. Empirical evidence suggests that superior financial and ESG performance, coupled with peer influence, significantly correlates with target validation. These dynamics highlight the interplay between internal capabilities and external pressures in shaping mitigation strategies. Together, these studies offer a multifaceted view of how climate-related issues are absorbed into financial decision-making, revealing both progress and persistent gaps in the alignment between sustainability goals and market behavior.