ABSTRACT
Many scholars have lately emphasized examining the relationships between climate change and business operation. The majority of them utilize statistical and benchmarking methodologies to examine the effects of climate change on business operation and financial performance. These methodologies draw primary data from questionnaire-based surveys and annual corporate sustainability reports. These data offer limited insights for our understanding regarding the future relationship between climate change and business economic performance. To contribute to this literature, this book chapter suggests a system dynamic model to examine the tendency of the relationships among climate change risks and business financial performance. It examines how regulatory risks, reputational risks and litigation risks will affect the business performance. Thus, a general mental model will be designed to assist managers’ and scholars’ understanding regarding climate change risks and business performance through a scenarios-based approach. The findings show that under certain circumstances, climate change risks might have positive relationships with business financial performance and reputation.
