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Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models

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A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Sustainability and Finance".

Deadline for manuscript submissions: closed (30 September 2023) | Viewed by 16857

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Special Issue Editors

Prof. Dr. Eleftherios I. Thalassinos

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Guest Editor

1. Faculty of Maritime and Industrial Studies, University of Piraeus, 185-33 Piraeus, Greece
2. Faculty of Economics, Management and Accountancy, University of Malta, 2080 Msida, Malta
Interests: sustainability; risk management; finance and financial institutions; business models
Special Issues, Collections and Topics in MDPI journals

Prof. Dr. Simon Grima

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Guest Editor

1. Faculty of Economics, Management and Accountancy, Insurance and Risk Management Department, University of Malta, MSD 2080 Msida, Malta
2. Faculty of Business, Management and Economics, University of Latvia, LV-1050 Riga, Latvia
Interests: financial technologies; financial management and asset management; risk management; compliance and regulations; corporate finance; corporate governance; audit management; financial services; behavioral economics
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

This special volume is dedicated to the 18th Edition of the International Conference in Applied Business and Economics, and it aims to present studies and research projects that have already been conducted and aim to mitigate the effects of climate change and sustainability standards on several industries not only in terms of investing, financing, and modeling, but also in terms of risk management.

In particular, the volume will highlight the role of the insurance industry when it comes to climate risk and sustainability, the role of the financial industry and its capacity to finance the infrastructure needed, the business models that have to adapt to the new standards and the society that must prepare for such a big change.

Education systems and the curriculum have to be organized in a different manner. The Green Deal, a new framework introduced by the EU, has to be followed, while this framework simultaneously creates new motivations for social sciences to consider human factors, climate change, sustainability and risks as conditions in any research that will be conducted in the future.

In this special volume, we encourage the submission of contributions that relate (but are not limited) to the following:

The role and impact of insurance in tackling climate change;
The ESG strategy: culture, coordination and understanding of the next big sustainable lever;
Opportunities in the green revolution;
Climate change: present and future expectations;
The impact of climate change on the role of the risk manager, the actuary, and the internal auditor;
The impact of climate change and sustainability measures on compliance and regulation;
The impact of climate change and sustainability standards on banking and finance;
The impact of climate change and sustainability standards on the energy industry;
Risk management issues related to climate change and sustainability;
Case studies from leading insurance companies on sustainable, net zero and futureproof operations;
The Green Deal and its consequences for the global economy;
Social impacts from climate change and sustainability;
Business models and climate change;
Sustainability measures for firms’ financial performance in several industries;
ESG drivers for several industries;
Psychological issues related to climate change;
SME’s strategies, climate change and sustainability;
Transport risks, climate change and sustainability.

Prof. Dr. Eleftherios I. Thalassinos
Prof. Dr. Simon Grima
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

climate change sustainability and impact in business models
climate change sustainability and impact in insurance industry
the green deal, sustainability, and development
energy, renewable energy sources and economic stability
financial sustainability, banking and investing
climate change, sustainability standards and impacts in the society

Published Papers (7 papers)

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Research

21 pages, 369 KiB

Open AccessArticle

The Impact of Adherence to Sustainable Development, as Defined by the Global Reporting Initiative (GRI-G4), on the Financial Performance Indicators of Banks: A Comparative Study of the UAE and Iraq

by Ali Mohammed Abbas AL-Janabi, Mohammad Javad Saei and Reza Hesarzadeh

J. Risk Financial Manag. 2024, 17(1), 17; https://doi.org/10.3390/jrfm17010017 - 4 Jan 2024

Viewed by 1783

Abstract

Based on stakeholder theory, disclosing sustainable development information is fundamental to achieving a competitive advantage and improving a company’s financial performance. There has been a notable absence of studies examining the degree of adherence to sustainability based on the latest indicators from the Global Reporting Initiative (GRI-G4) Guidelines and its impact on financial performance, specifically within the banking sector in emerging Arab economies. Consequently, this study explores the correlation between the degree of adherence to sustainability and its dimensions (economic, social, and environmental) as defined by GRI-G4 and financial performance within a sample of banks in Arab nations (the United Arab Emirates “UAE” and Iraq) from 2019 to 2021. The research hypotheses were examined using a multiple linear regression model. The empirical findings reveal that, on average, UAE banks exhibit a sustainability adherence level of 57% according to GRI-G4, while their Iraqi counterparts demonstrate a significantly lower adherence of 17%. Notably, the degree of sustainability adherence substantially impacts the financial performance of banks in both countries. Furthermore, the results also indicated that the economic dimension of sustainability has a positive impact, while the environmental dimension has a negative impact, and in contrast, the social dimension does not significantly affect the financial performance of banks in both countries. This study provides insights for banks and policymakers to enhance their sustainability practices and elevate the level of disclosure, especially within Arab nations. This, in turn, can lead to greater compliance with sustainability standards, improved transparency, and reduced information asymmetry. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

29 pages, 1962 KiB

Open AccessArticle

Flood Insurance, Building Codes, and Public Adaptation: Implications for Airport Investment and Financial Constraints

by Abderrahim Assab

J. Risk Financial Manag. 2023, 16(8), 363; https://doi.org/10.3390/jrfm16080363 - 7 Aug 2023

Cited by 1 | Viewed by 1037

Abstract

This paper investigates the impact of flood management policies on airport investment and the resulting financial constraints. Specifically, it examines the effects of flood insurance, building codes, and public adaptation investment on the investment decisions of 100 United States airports located in flood-prone areas. The paper estimated the financial loss from extreme precipitations and flooding using novel data from the United States Federal Emergency Management Agency, and a differences-in-differences framework leveraging the introduction of the 2012 Biggert–Waters reform of the National Flood Insurance Program. The findings reveal that while flood insurance costs negatively influence overall airport investment, they do not significantly affect investment–cash sensitivity. On the other hand, the introduction of stricter building codes and public adaptation investment leads to increased cash usage for investment purposes, particularly among airports exposed to extreme precipitation and flood risks. Furthermore, the analysis suggests that the observed increase in financial constraints resulting from stricter building codes and public adaptation investment is likely driven by the asymmetry of information rather than the materiality of flood risk. In other words, public investment in flood risk reduction appears to signal to investors that the airport is exposed to flood risk, potentially leading to increased financial constraints. This finding highlights the importance of considering information asymmetry when assessing the impact of flood management policies on financial constraints. Understanding the underlying drivers of these effects is crucial for supporting resilient infrastructure development and informing effective decision-making in flood-prone areas. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

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12 pages, 302 KiB

Open AccessArticle

Do Farmers Demand Innovative Financial Products? A Case Study in Cambodia

by Qingxia Wang, Yim Soksophors, Khieng Phanna, Angelica Barlis, Shahbaz Mushtaq, Danny Rodulfo and Kees Swaans

J. Risk Financial Manag. 2023, 16(8), 353; https://doi.org/10.3390/jrfm16080353 - 27 Jul 2023

Cited by 1 | Viewed by 1018

Abstract

This study examines Cambodian farmers’ demand for weather index insurance (WII), an innovative financial product, for managing climate change-related risks. Rice and cassava farmers in Battambang Province of Cambodia were interviewed to understand their preferences for WII. We applied a binary logistic model to quantify the factors that influence farmers’ WII demand. We discovered that farmers’ marital status and off-farm labor are crucial factors that impact the demand for WII. More importantly, we also investigated gender differences, considering the critical role of women in the agricultural sector and personality differences between men and women. Our findings indicated that for male respondents, being married and having an additional off-farm laborer increase the probability of demand for WII by 72.6% and 36.8%, respectively. For female respondents, the education level is the most significant factor in making purchase decisions. An additional year of education increases the probability of WII demand by 5.0%. Generally, our results are consistent with some prior studies but inconsistent with others. This suggests that further research is necessary to understand the barriers associated with WII schemes and how to overcome them. Regardless, our study provides valuable insights for various stakeholders in implementing WII schemes, including financial professionals, insurance companies, communities, and governments, for designing more flexible WII products, improving farmers’ financial literacy, and providing effective post-event support to enhance farmers’ resilience to climate change. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

17 pages, 300 KiB

Open AccessArticle

Forecasting Methods of Key Ratios and Their Impact in Company’s Value

by Angelos Liapis, Stylianos Artsidakis and Christos Galanos

J. Risk Financial Manag. 2023, 16(3), 140; https://doi.org/10.3390/jrfm16030140 - 21 Feb 2023

Viewed by 2212

Abstract

This paper aims to develop a comprehensive procedure for calculating the fair value of a company by predicting its future values using historical data of key ratios and applying dynamic algorithms to improve the selection of forecasting methods. The most important business valuation methodologies are based on discounting a firm’s future variables, and there are many ways to predict them through financial and quantitative methodologies. This paper provides the most important and commonly used time series forecasting methodologies that can be used for variables, such as financial ratios, and proposes three different algorithms to help and improve the selection of the best-fit method for each of the model’s variables. Another, more indirect way of predicting values is using operational research methodologies, such as Monte Carlo simulation, where the output of the sensitivity analysis gives the most likely firm value, taking into account the distribution of each variable. This paper includes a complete example of using the above procedures in a real Greek company to calculate its fair value. It offers alternative approaches to the problem that exists around the process of predicting variables, with the help of technology. We hope this will be a useful tool for future use. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

13 pages, 254 KiB

Open AccessArticle

Financing for a Sustainable Dry Bulk Shipping Industry: What Are the Potential Routes for Financial Innovation in Sustainability and Alternative Energy in the Dry Bulk Shipping Industry?

by George Pangalos

J. Risk Financial Manag. 2023, 16(2), 101; https://doi.org/10.3390/jrfm16020101 - 6 Feb 2023

Cited by 4 | Viewed by 3722

Abstract

Environmental, regulatory, and economic exogenous disruptions force companies within the maritime shipping industry to become more sustainable. Financing for implementing the necessary changes is particularly challenging for these companies, considering their narrow margins. With the changes in the shipping industry being intrinsically capital-intensive, funding is a particular issue, as few institutional or individual investors can provide the capital required. This paper investigates the challenges of financing. Drawing from the theory of pecking order on debt and equity, it conceptualizes the relation between the modes of financing for the maritime shipping companies and the nature of the disruptions. Initially, we analyze the various IMO decarbonization regulations, GHG emissions, alternative fuels, and green energy. Moreover, the relationship between fleet operation and management and finance is explored. The paper provides a framework to illustrate from a financial perspective the plethora of challenges and disruptions that have troubled the industry. We then recommend more suitable funding routes for companies to gauge the proper mix of equity and debt levels, bonds, and leverage, based on the company’s characteristics, such as size or ESG performance, as analyzed via the lens of corporate financing, along with the nature of the disruption, such as high inflation or geopolitical conflicts. In more detail, the paper focuses on key environmental, social, and governance (ESG) drivers both in the short-term and the long-term within the dry bulk shipping industry: impact investing and ESG factors are driving new investment opportunities and contributing to risk mitigation and long-term investment returns. The most pressing financial and economic questions of the time are wildly extended equity and bond valuations, inflation, and the conundrum most central banks face. Given these uncertainties, from an investment perspective for equity markets, the risk/return outlook for risk assets is skewed to the downside, making a cautious approach prudent for maritime shipping companies. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

13 pages, 1955 KiB

Open AccessArticle

Bibliometric Analysis of Green Finance and Climate Change in Post-Paris Agreement Era

by Martin Kamau Muchiri, Szilvia Erdei-Gally, Mária Fekete-Farkas and Zoltán Lakner

J. Risk Financial Manag. 2022, 15(12), 561; https://doi.org/10.3390/jrfm15120561 - 29 Nov 2022

Cited by 10 | Viewed by 3376

Abstract

Climate change is undeniably one of the long-term challenges confronting humanity across the globe. Various nations have taken initiatives that help reduce greenhouse gas emissions to the environment as well as accelerate financial flows to clean and sustainable projects. The paper provides an overview of green finance after the Paris Agreement by adopting a bibliometric analysis of the selected literature. The study reviewed the literature from the Web of Science database between 2015 and 2022. Data cleaning, formatting, and analysis was performed using VOSviewer and R-studio. Our study indicates increased scholarly interest on the issue of green financing. Most scientific research has been published in climate policy and sustainability journals but lacks mainstream interest in economic and finance journals. Based on our results, it is recommended that further studies on green financing be carried out from the economic and financial perspective using quantitative approaches to supplement the existing literature and provide a wider view to policy makers and regulators. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

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12 pages, 316 KiB

Open AccessArticle

Factors Affecting Risk Attitude of Rice Farmers: Evidence from Vietnam’s Mekong Delta

by Khuu Thi Phuong Dong, Phan Dinh Khoi, Phan Hong Nhung, Nguyen Thanh Binh and Tran Thi Hanh Phuc

J. Risk Financial Manag. 2022, 15(7), 278; https://doi.org/10.3390/jrfm15070278 - 23 Jun 2022

Viewed by 1989

Abstract

Agricultural production accounts for 64.2% of the Vietnam’s Mekong Delta. However, this sector has to face damage risks, especially from the natural disasters, such as flood, drought, severe soil salinity, pests, and erosion, which might factor into the farmers’ risk attitude and their decision-making relative to investment in production activities. This study analyzes the factors influencing the risk attitudes of the rice farmers, based on evidence from the Vietnamese Mekong Delta. The data were collected through face-to-face interviews and experimental games with 145 rice farmers. An ordered probit regression model was applied to estimate how the factors affected the rice farmers’ risk attitudes. The risk-neutral farmers comprised 53.72% of farmers in the survey, while 31.72% and 15.15% were risk-preferred and risk-averse farmers. The study results indicated that age, number of rice crops per year, household assets, income from rice production, and credit accessibility were the main factors affecting the farmers’ risk attitudes. The results suggest that the financial incentives’ policies to compensate for losses in uncertain conditions and increase the household income, diversification of income sources, and improving the accessibility of formal credit might be useful to increase farmers’ willingness to accept the risks of investing in better profitability projects and gaining a higher income. Full article

(This article belongs to the Special Issue Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models)

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Climate Risk and Sustainability: The Impact on Insurance, Investments, Financing, the Banking Industry, Business and Social Models

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