Climate Change Risk and Financial Performance in Cyprus: Management Perceptions

This study examines the perceptions and strategies of senior managers from 30 firms in Cyprus regarding climate change risks and their impact on financial performance. The research targets a diverse range of industries, with a significant representation of small and medium-sized enterprises (SMEs). The findings reveal that most firms exhibit a moderate understanding of climate change risks, with larger firms being more proactive in conducting formal assessments and integrating these risks into their strategic planning. Key risks identified include extreme weather conditions, increased energy costs, and regulatory changes. The financial impact of climate change varies significantly across industries and firm sizes. Larger firms, such as those in manufacturing and retail, manage to stabilize profitability through technological upgrades and efficiency improvements. In contrast, financial services firms face substantial challenges due to increased insurance claims and regulatory costs. Smaller firms report adverse effects on profitability due to rising material costs, though investments in renewable energy provide some mitigation. The ability to adapt to regulatory changes and market demands also plays a critical role in sustaining profitability in the face of climate change. This study underscores the critical need for enhanced climate change risk awareness, strategic integration, and supportive measures to bolster resilience and profitability across all sectors in Cyprus, emphasizing the importance of proactive climate risk management as a cornerstone of sustainable business practices.