Financing Under Climate Uncertainty: Impact of Climate Risk on Debt Structure Decisions

Authors

  • Muhammad Arif Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan
  • Dr. Ammar Abid Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan
  • Ali Raza COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan
  • Eng. Irfan Ali Venturetronics

Keywords:

Climate Risk, Project Finance, Debt Finance, Global Analysis

Abstract

Geographical uncertainties comprising climate change influence financing decisions, specifically the choice of debt structure. This study investigates the impact of climate risk on debt structure choice, whether the debt structure is project finance or recourse loans. For this purpose, data for climate risk ranking country wise, and asset-based loans comprising project finance loans versus other loans collected for the period 2011-2018 resulted in 24,226 loan transactions from 92 countries. Using logistic regression, we find evidence that higher climate risk is associated with an increase in probability of debt structure choice to be project finance. The results contribute to the literature on climate change and debt financing. The study has implications for borrowers, lenders and policy makers.

Author Biographies

  • Dr. Ammar Abid, Department of Management Sciences, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan

    Associate Professor

  • Ali Raza, COMSATS University Islamabad, Lahore Campus, Lahore, Pakistan

    Deputy Treasurer

  • Eng. Irfan Ali, Venturetronics

    Engineer

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Published

2025-05-13

How to Cite

Financing Under Climate Uncertainty: Impact of Climate Risk on Debt Structure Decisions. (2025). Journal of Business and Management Research, 4(2), 123-155. https://jbmr.com.pk/index.php/Journal/article/view/401

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