Report

Circularity can strengthen companies’ financial resilience by reducing their exposure to the risks of the linear model. An analysis of 643 listed companies in the EU-15 and Switzerland over 2018–2023 shows that greater circularity is associated with lower default probabilities and lower implied CDS spreads. The relationship remains significant after controlling for ESG ratings, beyond which circularity provides additional information on credit risk. The benefit is most evident among companies further along in the circular transition. The findings suggest integrating circularity into corporate strategies, risk assessment, and financing and investment decisions.

Keywords: circular economy, credit risk, de-risking, non-financial disclosure, sustainable finance
DOI: 10.57590/1120-5032-202604ENG-9