Carbon Performance and Climate Change Commitment: Implications for Firm Credit Risk in the MENA Region

This chapter investigates how carbon performance and climate change commitments affect corporate credit risk in the Middle East and North Africa (MENA) region, using a sample of publicly listed firms across 14 MENA countries over the period 2013–2023. We use market-based and accounting-based measures to assess credit risk; we measure carbon performance using firm-level Scope 1, 2, and 3 emissions data, adjusted for firm size and industry norms; we estimate climate commitment using firm disclosure data on targets, governance, and sustainability actions. The findings reveal wide variations in emissions, carbon performance, and credit risk across sectors and countries. This chapter contributes to the literature by offering a novel empirical analysis specific to the under-researched MENA region; we integrate stakeholder, legitimacy, and resource-based theories to explain how firms’ climate actions influence creditworthiness. These findings underscore the importance of improving disclosure practices and implementing sector-specific policies to support a more sustainable financial ecosystem.