Firm-level Climate Vulnerability and Corporate Risk-taking: International Evidence
Date:
4 March 2025Type:
Discussion PapersTags:
Climate change exposure, corporate risk-taking, Asia Pacific countriesPrint Article:
This study examines the association between firm-level climate change risk exposure and corporate risk-taking using a sample of 50,782 firm-year observations from 2003 to 2021 across 58 countries worldwide. Using a time-varying measure of firm-level climate change risk exposure derived from corporate conference call transcripts, we find a negative relationship between firm-level climate change risk exposure and corporate risk-taking. We also find that the negative association is more pronounced for firms with higher environmental innovation and firms domiciled in countries with stakeholder-oriented business cultures and stronger governance. Our key finding is robust under several alternative corporate risk-taking and climate change risk exposure proxies. The findings of this study could be used by policymakers to enact regulations limiting risky investments in climate-vulnerable sectors or to provide economic safety nets for businesses impacted by climate change.
