# **VII. Conclusions**

For the analysis of firms’ investment strategies, researchers have predominantly observed and described the role of various determinants, including information barriers and financial constraints in investment strategies in developed countries (Thollander et al, 2007; Fleitera et al, 2012; Kalantzis and Revoltella, 2019). Building upon previous research, this paper develops a new framework of firms’ mitigation measures. Using unique data from the joint EBRD-EIB-WBG Enterprise Surveys, it empirically examines the determinants of the mitigation scope (i.e. the total number of mitigation measures) and the number of measures that firms take to follow certain strategic preferences of firms’ investment areas. We specifically analyze factors that other researchers had previously suggested as possible determinants for firms’ investment strategies (De Haas et al, 2022; Kalantzis and Revoltella, 2019). Methodologically, we apply an IV logistic regression model in addition to the logistic regression model in our econometric analysis.

In line with our priors, we find that better green management practices positively impact the transition strategy of firms to a sustainable future. Moreover, the magnitude of this impact increases with the number of measures implemented. This result implies that more aware firms about climate change impacts and the various existing measures that tackle them are the ones to engage the most in mitigation measures. This relationship is exponential and positive and suggests that firms with the best management practices overcome information barriers and adopt more mitigation measures.

Our econometric analysis also shows that firms’ access to finance is an important determinant for adopting measures, especially for capital-investment measures, such as those in production processes. Specifically, the more financially constrained firms are, the less likely they pursue many mitigation measures to reduce energy costs and their carbon footprint. Once again, the exponential relationship is evident, implying that the impact of financial constraints on the investment strategy of firms is higher for the lower and upper range of measures that could be implemented.

Based on the above, the key findings are that financial constraints and information barriers not only influence the transition strategy of firms, but also the _number_ of measures that they implement along the different strategic areas, namely support and production processes. The econometric results further show that the impact of these factors and their importance in firms’ transition strategies are influenced by the location where firms operate. For example, in the MENA region, green management quality appears to be more important for the firms’ decision to make green investments (and the number of different green investments to make) than credit constraints. Although access to finance is essential for investing in green, mainly because green investments compete with other core-business activities, information appears to play a greater role in the investment decision-making process and the selection of mitigation measures in this geographical setting.

This has important implications. Climate change will continue to have significant effects on business activities requiring firms in various industries and regions to adapt appropriately at a local level. Policy makers should guide this process to enable an effective and cost-efficient business model transformation because some mitigation measures will require investment decisions with long planning and amortization times (Stern, 2007). In this respect, our findings are valuable as they explain how governments can support this transformation process. Governments could increase the scope of firms’ business model 29