Climate risk and corporate investment behavior in emerging economies

Our study examines the impact of climate risk on the investment outcomes of publicly traded firms in emerging economies, an important yet understudied issue amid the rising occurrence of severe climate events. Despite the emphasis on the macroeconomic impacts of climate events in existing literature, there is limited insight into the impacts on firm-level investment decisions and outcomes, particularly in regions with higher vulnerability to climate change. We assess climate risk and corporate investment efficiency through the Global Climate Risk Index (CRI), utilizing a dataset comprising 308,620 firm-year observations across 52 countries between 2007–2019. The findings of our study show that firms in higher climate risk regions experience lower investment efficiency due to adopting more conservative investment strategies to mitigate operational and financial uncertainties. Additional analysis of the industries that require stable environmental conditions for operation or depend heavily on fixed assets highlights the significance of integrating climate risks into financial and investment policies that can improve corporate resilience and long-term growth.

© 2025 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).