Climate Risk Perceptions Research Articles

Industry return volatility and spillover effects in stock market under climate risk perception

ABSTRACT Utilizing alternative dimension reduction methods, this study constructs three Climate Risk Perception Indices (CRPIs) to quantify the impact of investor climate change sentiment on industry return volatility in the Chinese stock market. There are several findings in this study including (1) the CRPIs effectively capture the trend of climate change in China over the past decade. (2) The investor’s attention to climate change positively influences short-term stock market returns, exhibiting seasonal characteristics and industry heterogeneity. (3) The attention serves as an information sender for stocks in Telecommunication, Oil & Petrochemicals, and Environmental Protection. (4) The total spillover effect among climate-sensitive industries is significantly higher during extreme climate events. These conclusions provide empirical evidence for the stock market to respond effectively to climate risks.

Climate risk perception and corporate ESG performance: evidence from China

PurposeThis study examines the impact of climate risk perception on corporate environmental, social and governance (ESG) performance from a microfirm perspective.Design/methodology/approachUsing a sample of Chinese listed companies from 2009 to 2021, we constructed corporate climate risk perception indicators based on the Management Discussion and Analysis (MD&A) in the annual reports of the companies, and analyzed it using ordinary least squares regression.FindingsThe results show that climate risk perception improves corporate ESG performance by encouraging green innovation. Heterogeneity analysis suggests that the greater the magnitude of climate risk shocks to the firms, the stronger the risk coping ability and the weaker the environmental regulation, the more pronounced the improvement of climate risk perception on corporate ESG performance. Furthermore, economic consequence analysis shows that the enhancement effect of climate risk perception on corporate ESG performance contributes to increasing corporate value.Originality/valueThis study emphasizes the significance of corporate climate risk perception in enhancing ESG performance. It provides a theoretical basis for enterprises to respond to climate risk and sustainable development.

Time-frequency spillovers and connectedness between Chinese climate risk perception and energy markets

Abstract With the global warming is becoming more and more serious, the global need for low-carbon economic transition is increasingly urgent. This study focuses on the time-frequency spillover effect of climate risk perception and energy market. By constructing transition risk perception and physical risk perception index and using time-frequency analysis, we quantifies the impact of climate risk perception on fossil energy and clean energy markets, and reveals the dynamic relationship between the two. The findings indicate that China’s sense of transition risk from climate change has increased since the Paris Climate Agreement, but the perception of physical risk has changed less. Moreover, the spillover effect between climate risk perception and energy markets is time-varying and increases rapidly in the face of climate or energy related uncertain events. The COVID-19 pandemic has resulted in a sharp drop in total spillover, and there is little near-information spillover between the energy markets and perceptions of climate danger. We also found that in the short term, energy market spillovers are net recipients of climate risk perception according to marginal spillover research. However, this connection changes to become a net transmitter from 2021. In the medium to long term, the perception of climate risk begins to function as a net transmitter of spillovers to energy markets.

Environmental Quality of Life (EQoL) Survey to Assess Climate Risk Perceptions in Urban Underserved Communities

Environmental Quality of Life (EQoL) Survey to Assess Climate Risk Perceptions in Urban Underserved Communities

Climate change adaptation attributes across scales and inter-institutional networks: insights from national and state level water management institutions in India

Effective climate change adaptation requires cohesive inter-institutional networks across different scales, facilitating the sharing of data, information, knowledge, and practices. However, the impact of adaptation attributes across scales is poorly understood due to limited focus on these networks. Based on interviews with 26 institutions operating at the national level (ION) in India and 26 institutions operating within a state (Himachal Pradesh) (IOS), this study analysed adaptation attributes and the inter-institutional networks across the two scales to understand its implications at different scales. IONs have a greater capacity (compared to IOS) to frame guidelines, standards and regulations for practitioners along with better accessibility to resources and information. When coupled with bridging institutions, this can enhance adaptive capacities at other scales. Conversely, learnings from low regret adaptive measures being implemented by IOS are opportunities for informing national policy strategies. While national adaptation strategies and goals can inspire adaptation at lower scales, the currently fragmented inter-institutional network in India reduces the passage and accessibility of data and information, creating a bottleneck for the smooth devolution of adaptation attributes. Recruitment and deployment practices for water officials further entrench silo attitudes, impeding essential data accessibility. Adaptation needs comprehensive networks across vertical, horizontal, and diagonal institutional connections to improve climate risk perception and strategy implementation. Policy measures should consider socio-institutional factors beyond legislative prescriptions.

Firm‐level climate risk and corporate violations: Perspective of corporate managers' pressure perception

AbstractThis study is grounded in the perspective of pressure perception, examining how a company's awareness of climate risk influences its propensity for violations. The study reveals that an enhanced perception of climate risks is correlated with an increased likelihood of such behaviors. This effect is primarily mediated through a mechanism of stress transmission, exacerbating the myopia and rent‐seeking activities of corporate managers. Furthermore, this study integrates a heterogeneity analysis within the framework of the fraud triangle theory to explore strategies for mitigating the impact of climate risk perception on corporate violations. The findings indicate that the influence of climate risk perception on corporate violations becomes insignificant under certain conditions: when companies offer strong equity incentives to managers, thus alleviating pressure; when companies are heavily influenced by Confucian culture, thereby reducing rationalizations; and when companies possess robust internal governance and are subject to stringent external oversight, thereby diminishing opportunities for violations. This study not only validates the pressure transmission mechanism of climate risk but also proposes avenues for mitigating the onset of non‐compliant behaviors induced by the perception of climate risk.

The impact of corporate climate risk perception on green outward foreign direct investment.

How to address climate risks and achieve green transformation has become a critical issue that businesses urgently need to consider. We apply growth option theory and prospect theory to examine the impact of corporate climate risk perceptions on green outward foreign direct investment (GFDI) using a research sample of heavily polluting listed companies in China from 2009 to 2022. Our findings reveal that companies with higher perceived climate risks tend to increase their inclination towards GFDI, and the informal hierarchy of boards reinforces the positive effect of both. Supplementary analyses indicate that through GFDI, corporations can exert positive effects on their own environmental performance and future green innovations. The positive impact is notably more visible in nonstate-owned companies and sample units from provinces along the Belt and Road. These findings extend the economic consequences of climate risk at the firm level from the perspective of international business research and provide empirical references for firms to promote their own green transformation from a practical perspective.

Climate risk perceptions, change in water demand, and preferences for future interlocal collaboration

Climate risk perceptions, change in water demand, and preferences for future interlocal collaboration

Between risk perceptions and adaptation policies: centering climate justice and social innovation in heat vulnerable cities

ABSTRACT This study leverages the roles of climate justice and social innovation in the perceptions of climate risk and climate adaptation policies within the local heat-vulnerable areas of seven Korean metropolitan cities. Using survey and document-based analyses, this work examines residents’ perceptions of climate risks and evaluates local climate adaptation plans in the context of climate adaptation policies. Results demonstrate that economic and social fairness aspects and collaborative learning activities played positive roles in enhancing adaptation policies. Further, higher participation as an aspect of social innovation led to heightened climate risk perceptions. Findings imply that social innovation and climate justice features can contribute to triggering risk perceptions as an initial stage for enabling subsequent steps in support of climate adaptation policies.

Multidimensional Cross-Country Measurement of Climate Change Perceptions

ABSTRACT Understanding public perceptions of climate change is crucial for more targeted communication and better-informed policymaking. Moreover, the perceptions of climate change encompass different aspects and thus need to be defined and measured using a multidimensional approach. In this paper, we introduce the Climate Perceptions Index (CPI), a composite measure that comprehensively assesses the public perceptions of climate change, based on a sample of over 100 thousand active Facebook users across 107 countries. We construct the CPI as an aggregate of three distinct dimensions that quantify the awareness of climate change, risk perception, and commitment to action. The results show that the extent of climate change perceptions varies significantly across countries and across dimensions. Countries with the highest and lowest scores globally can be found in almost all regions, and across all levels of socio-economic development. Furthermore, we analyze the relationships between the CPI dimensions and find that the influence of risk perception on commitment to action is the strongest at the lowest levels of climate change awareness. This highlights the possibility of climate change risk normalization at higher levels of awareness, and further shows that effective policies and strategies must not only focus on raising knowledge about climate change, but also overcome the normalization of its threats.

Public Perception of Climate Risk, Environmental Image, and Corporate Green Investment

Climate risk has garnered greater attention in recent years, increasing the public’s demand for climate change information. Public attention to climate risk has also increased corporate environmental governance pressure, which inevitably has an impact on the green investment of enterprises. To deepen the understanding of the issue, this article uses Chinese A-share listed manufacturing companies as a research sample from 2018 to 2022 to investigate the impact of public climate risk perception on corporate green investment. This research found that public perception of climate risk can help to promote green investment among enterprises; its route of action is generally achieved through green technological innovation; and an environmentally conscious image can strengthen the promotion effect of the public perception of climate risk on green investment. Further, public perceptions of climate risk contribute more to corporate green investment and the moderating effect of environmental image is more significant in regions with low levels of environmental regulation. This study not only helps to improve the level of public participation in climate governance, but also accounts for environmental regulation limitations. Clear enterprise differentiation and preventive green investment have a positive impact on enterprises and has the ability to improve climate governance and help companies consciously fulfill their environmental responsibility.

Haze Pollution, Climate Risk Perception and Demand for Commercial Health Insurance

Haze pollution not only affects the quality of economic growth and the image of the government, but also seriously affects public health. With the improvement of climate risk perception, the public is actively seeking all kinds of risk management measures to combat the hazards of haze pollution. The study of the relationship between haze pollution, climate risk perception and the development of commercial health insurance is of great significance to the formulation of haze control policies and the improvement of social security system. This paper attempts to explore the relationship between haze pollution, climate risk perception and commercial health insurance demand by establishing static and dynamic models based on panel data from 31 provinces in China from 2005 to 2022. Also, the spatial spillover effects of haze pollution in different regions on the development of commercial health insurance in other regions are investigated by establishing a spatial Durbin model. It is found that (1) haze pollution has a lagged positive effect on the demand for commercial health insurance; (2) haze pollution has a significant spatial spillover effect on the development of commercial health insurance; (3) this study used Python technology to construct a climate risk perception index, and found that the moderating effect of the residents’ perception of climate risk existed significantly, and that the residents might take other measures to manage the risk in the short term, but in the long term, the climate risk perception showed a positive correlation with the level of education. This paper provides implications for government departments and social media to strengthen education and publicity, improve residents’ awareness of risk diversification, and deepen the concept of commercial health protection.

Social learning about climate risks

AbstractWith a social network adjacency matrix constructed from the Facebook Social Connectedness Index (SCI), this paper examines whether social learning facilitates climate risk perception updates to inform climate adaptation. We find that Hurricanes Harvey and Irma‐induced regional flooding increased flood insurance policies nationwide to the extent of each county's social network proximity to the flooded areas, with a corresponding update in climate risk perception. Social learning resulted in an additional 250,000 policies in flooded counties and 81,000 policies in unflooded counties over 3 years. We find evidence of the salience effect but no support for adverse selection or over‐insurance.

Effects of communicating the rise of climate migration on public perceptions of climate change and migration

Climate change-induced migration is a rapidly increasing phenomenon estimated to affect millions of people in the coming decades. With increasing media coverage of climate migration, including within the United States, it is critical to understand how to effectively communicate about this issue. In two high-powered experiments of U.S. Democrats and Republicans (& leaners; Study 1: N = 1452; Study 2: N = 1873), we test the effects of fictional news coverage about domestic and international climate-induced migration on climate change and migration risk perceptions, warmth toward migrants, and policy support. We also tested whether including a personal story about a specific migrant alongside numerical trends could increase support for climate change mitigation and aiding potential migrants. Impacts on climate outcomes were minimal: in Study 1, those exposed to different message frames reported similar climate policy support and risk perception in Study 1, and, in Study 2, domestic (but not international) climate migration coverage slightly increased climate risk perceptions and marginally increased mitigation policy support compared to a no-message baseline. In both studies, international migration was perceived as riskier to Americans than domestic migration, and coverage of international migration heighted this perceived risk. Coverage of domestic climate migration, on the other hand, did not boost risk perceptions of that type of migration. Furthermore, coverage of international climate migration led to greater support for adaptation infrastructure to help potential migrants stay home but did not affect support for policies to help migration. Contrary to expectations, the inclusion of personal stories did not affect warmth toward migrants in either study. Political affiliation dominated associations with all climate change and migration outcomes, likely obscuring potential framing effects. These results suggest that coverage about climate-induced migration may face challenges in shifting entrenched public opinion and policy support. Communicators should be aware of the limitations of using this type of coverage to promote constructive actions to address climate change and migration.

An Investigation of Climate Change, Eco-Anxiety and Risk Perception in The Context of Theory of Planned Behaviour

Climate change, risk perception, and eco-anxiety are subjects of growing research interest in the modern time. However, there is paucity of research about these variables and their overall impact. Additionally, these variables have been studied in a limited nature in the context of Theory of Planned Behaviour. The current study aimed to confirm whether measures of eco-anxiety and risk perception capture distinct emotional responses to climate change. Additionally, it also aimed to examine how all these constructs can be understood in the light of Theory of Planned Behaviour. It was found that attitude, norms, PBC, risk perception and eco-anxiety has a significant positive correlation with Climate Change Adaptation Behaviour Intention. Implications suggest that the understanding of the sub-components of Theory of Planned Behaviour along with a deep understanding of risk perception and eco-anxiety may help to create psycho-education modules which may help to promote Climate Change Adaptation Behaviour Intention.

How climate risk drives corporate green innovation: Evidence from China

This study examines the link between climate risk perception (CRP) and corporate green innovation (CGI) in Chinese firms. Using the MD&A, we introduce a novel method to assess climate risk, employing Word2Vec to construct CRP based on word patterns for A-share listed firms. Results show a strong positive relationship between CRP and CGI, notably in high-tech and state-owned enterprises. Firms excelling in environmental governance and digital technologies tend to pursue green innovation in response to climate risks. Our findings offer fresh insights into evolving firm perceptions of climate risks and their influence on green innovation.

How are climate risk shocks connected to agricultural markets?

In the climate-sensitive agricultural sector, product prices are particularly susceptible to climate risks. In this study, we constructed three novel climate risk perception indices—a climate policy uncertainty index, a climate physical risk index, and a climate concern index—using natural language processing and text mining to investigate their differential effects on bulk agricultural prices. The findings indicate that the responses of agricultural product prices to climate risk perceptions are more pronounced in the short term than in the long term. Moreover, the impacts of climate-related concerns and physical risks have stronger impacts than climate policy uncertainty. The dynamic analysis results also indicate that climate-related events have a great impact on investors and financial markets. Overall, the findings suggest that climate risk perceptions have become a significant factor in agricultural product price changes, which has important implications for policy regulators and market investors.

No risk, no fun…ctioning? Perceived climate risks, but not nature connectedness or self-efficacy predict climate anxiety

The consequences of climate change are becoming increasingly visible. Recent research suggests that people may respond to climate change and its predicted consequences with a specific anxiety. Yet, little is known about potential antecedents of climate anxiety. The current study aimed to understand the contribution of climate risk perception to climate anxiety, along with nature-connectedness, self-efficacy, and political orientation. With a sample of 204 German adults, we assessed these constructs together with environmental policy support that may result from climate anxiety. Stronger risk perception and a left political orientation predicted climate anxiety. Self-efficacy and nature connectedness, however, were unrelated to climate anxiety. In line with previous studies, climate anxiety correlated positively with environmental policy support but did not predict environmental policy support when controlling for climate risk perception. We discuss results with regard to further developing the concept of climate anxiety and its dynamics and suggest directions for future research.

Modelling agricultural innovations as a social-ecological phenomenon

Agricultural innovations involve both social and social-ecological dynamics where outcomes emerge from interactions of innovation actors embedded within their ecological environments. Neglecting the interconnected nature of social-ecological innovations can lead to a flawed understanding and assessment of innovations. In this paper, we present an empirically informed, stylized agent-based model of agricultural innovation systems in Mali, West Africa. The study aimed to understand the emergence of food security and income inequality outcomes through two distinct model structures: top-down, aid-driven (exogenous) innovation and bottom-up, community-driven (endogenous) innovation. Our research questions were: i) How does the inclusion of social-ecological interactions in the model affect food security and income inequality outcomes? ii) How do exogenous and endogenous mechanisms influence food insecurity and income inequality? iii) What are the conditions under which exogenous and endogenous mechanisms would improve food security? The structural design of the model was based on a combination of theory, empirics, and mapping of social-ecological dynamics within innovation systems. Using the Social-Ecological Action Situation framework, we mapped the social, social-ecological, and ecological interactions that jointly produce food security outcomes. The exploratory model analysis reveals three key insights: i) Incorporation of social-ecological interactions influences model outcomes. Scenarios with social-ecological interactions showed a stronger relationship between income inequality and food security, lower levels of food security, and higher levels of income inequality than scenarios with social interactions. ii) Endogenous mechanism leads to higher food security and income inequality than the exogenous mechanism. iii) Bidirectional outreach is more effective than unidirectional outreach in improving food security. Inclusion of social-ecological dynamics and interactions such as the role of climate risk perception, social learning and formation of innovation beliefs and desires is key for modelling and analysis of agricultural innovations.

Factors influencing smallholder farmers’ climate change risk perceptions: A behavioral approach in semi-arid regions of Zimbabwe

Abstract The resilience of the agricultural sector is increasingly threatened by climate change while rainfed agriculture has become more susceptible to climate and weather-related stressors. However, farmers’ perceptions of climate change risk which vary by niche, greatly influence their adaptation strategies. This study used a questionnaire survey to solicit factors that inform and shape climate change risk perceptions of smallholder farmers in semi-arid areas in Zimbabwe. A sample of 180 farming households was randomly selected from six wards of Beitbridge District, Matabeleland South Province. Descriptive statistics, chi-square tests, and the ordered probit regression model were used to assess the determinants of smallholder farmers’ perceptions of climate change risk. Results show that perceptions of climate change risk are significantly enhanced by educational level, participation in social groups, household experience in agriculture, access to climate information and extension services, as well as age, gender, and education level of the household head. However, resource endowments reduced the climate change risk perception of households. However, the weak influence of these factors points towards the existence of other issues that influence smallholder farmer climate risk perceptions that warrant additional research to understand how these inform and shape smallholder farmer decision-making. Nonetheless, there is a continuous need to improve smallholder farmers’ access to climate information and build their capacity to address emerging climate risks. This is critical to shaping their climate change risk perceptions and influencing their decisions to adopt resilience-building technologies.