Climate risk and corporate environmental performance: Empirical evidence from China

Abstract

This study creatively investigates the impact of extreme national climate risk on corporate environmental performance in the context of China. An innovative approach based on an assessment of the economic input-output life cycle is utilized to evaluate carbon footprint at the corporate level. We select the Chinese climate risk score calculated by Germanwatch to represent climate risk, and then test its effects on corporate carbon performance using the dynamic threshold model. The results indicate that an increase in national climate risk will promote corporate carbon emissions, which are more pronounced when the climate risk score is in the high-risk range. Furthermore, the effects of climate risk on corporate carbon performance differ across companies with different geographical locations and environmental restrictions. In addition, ownership and whether a company is listed on stock exchanges do not significantly affect the impact of climate risk on corporate carbon performance in China. Our findings reflect the subtle connections between Chinese companies and climate risk on the whole, and could help relevant business leaders, policymakers, and investors enhance related policies.