The Impact of Climate Change Factors on ESG Performance in Egypt

Climate change presents an escalating threat to corporate sustainability, particularly in emerging markets where institutional readiness and climate governance remain underdeveloped. This study investigates how climate-related factors shape firm-level Environmental, Social, and Governance (ESG) performance in Egypt an economy highly exposed to environmental stress. Using a balanced panel dataset of 48 non-financial firms listed on the Egyptian Exchange (EGX) from 2018 to 2023, the analysis examines the effects of two key climate indicators, carbon dioxide (CO₂) emissions and temperature anomalies, on ESG outcomes. Fixed effects and System GMM estimations are employed, with firm size, profitability (ROA), growth rate, and industry type as control variables.The results reveal that higher CO₂ emissions are significantly associated with lower ESG scores, while temperature anomalies exert a negative but statistically weaker effect, particularly on governance quality. Profitability and firm size positively influence ESG outcomes, suggesting that financially resilient firms possess greater adaptive capacity to address environmental pressures. These findings confirm that environmental degradation indicators have a direct influence on corporate sustainability ratings in Egypt. The study contributes empirical evidence from an under-researched frontier market and provides actionable insights for policymakers, investors, and managers to enhance climate-related disclosure, strengthen ESG governance, and accelerate Egypt’s transition toward low-carbon growth consistent with Egypt Vision 2030 and the UN Sustainable Development Goals (SDGs).