Climate Change Impact Assessment Model on Corporate Financial Performance: A Data-Based and Analytical Approach

Supaphorn Akkapin; Tubagus Achmad Doradjat

doi:10.54443/sinomika.v4i1.3473

Authors

Supaphorn Akkapin Rajamangala University of Technology Krungthep, Thailand
Tubagus Achmad Doradjat Rajamangala University of Technology Krungthep, Thailand

DOI:

https://doi.org/10.54443/sinomika.v4i1.3473

Keywords:

climate change, financial performance, data analytics

Abstract

Climate change has a significant impact on corporate financial performance worldwide. This study develops a model for assessing the financial impacts of climate change on corporate performance using a data-driven and analytical approach. The model integrates both physical and transitional risks caused by climate change and analyzes their effects on corporate financial metrics, such as profitability, operational costs, and market value. Through regression analysis, climate change scenarios, and Monte Carlo simulations, this research demonstrates that companies failing to anticipate climate change face substantial financial risks, while companies that adapt, such as those investing in low-carbon technologies, can reap long-term benefits. This study provides valuable insights for companies to manage climate risks and capitalize on opportunities arising from the transition to a low-carbon economy. Thus, it offers an approach that can help businesses plan and take strategic actions to mitigate the financial impacts of climate change.

Downloads

Download data is not yet available.

References

Arkema, K., et al. (2013). 'Coastal habitats and climate change: An ecosystem-based approach to risk reduction'. 'Nature Climate Change', 3(1), 4-6.

Bank of England. (2015). 'The impact of climate change on the financial system'. Bank of England.

Berrill, P., et al. (2018). 'Assessing climate change risks to agriculture: A multi-scale modeling approach'. 'Agricultural Systems', 163, 13-26.

Caldecott, B., et al. (2013). 'Stranded assets: A climate risk challenge'. 'Oxford University Press'.

Cavallo, E. A., Galiani, S., Noy, I., & Pantano, J. (2013). 'Catastrophic natural disasters and economic growth'. 'Review of Economics and Statistics', 95(5), 1549-1561.

Ceres. (2020). 'Getting climate smart: How to manage the financial risks of climate change'. Ceres.

Choi, J. S., et al. (2016). 'Predicting climate change impacts on business: Big data, machine learning, and analytics'. 'Journal of Business Research', 69(4), 1452-1460.

Delgado, M., & Khan, M. (2018). 'Climate change and its financial consequences: A review of current approaches'. 'Climate Risk and Sustainability', 6(3), 210-232.

Dietz, S., et al. (2016). 'Climate change adaptation and sustainable development: An integrated approach'. 'Climate Policy', 16(5), 532-545.

Dube, J.-P. (2017). 'Impact of climate change on the financial markets: A multi-sectoral analysis'. 'Global Financial Review', 6(2), 19-37.

Friede, G., Busch, T., & Bassen, A. (2015). 'ESG and financial performance: Aggregated evidence from more than 2000 empirical studies'. 'Journal of Sustainable Finance & Investment', 5(4), 210-233.

Hart, S. L., & Milstein, M. B. (1999). 'Global sustainability and the creative destruction of industries'. 'Sloan Management Review', 41(1), 23-33.

Horton, M., et al. (2020). 'Sentiment analysis of climate change discourse: Insights for investors and companies'. 'Journal of Climate Risk Management', 21(2), 101-115.

Hsiang, S. M., et al. (2017). 'Estimating economic damage from climate change in the United States'. 'Science', 357(6352), 183-188.

Höhler, S., et al. (2018). 'The role of financial institutions in financing climate change adaptation and resilience'. 'Journal of Environmental Management', 204, 150-161.

Jaffe, A., & Stavins, R. (2018). 'The impact of climate change on financial performance: Evidence from the global investment sector'. 'Environmental Economics and Policy Studies', 20(4), 335-349.

Krueger, P., Sautner, Z., & Starks, L. T. (2020). 'The importance of climate risks for institutional investors'. 'Review of Financial Studies', 33(3), 1066-1102.

Lewis, T., et al. (2017). 'Regulatory frameworks and business responses to climate risks'. 'International Journal of Business and Climate Change', 15(2), 102-119.

Lo, A. W., & Wang, T. (2015). 'Climate change risk and financial markets: A study on how businesses adjust to environmental change'. 'Financial Markets Review', 11(2), 77-98.

Millock, K., et al. (2016). 'The relationship between corporate environmental performance and market valuation'. 'Corporate Social Responsibility and Environmental Management', 23(3), 160-175.

Moser, S. C., & Ekstrom, J. A. (2010). 'A framework for evaluating the economic impacts of climate change'. 'Environmental Economics and Policy Studies', 12(3), 277-296.

Nielsen, M., et al. (2017). 'Environmental policy, corporate social responsibility, and the profitability of sustainable business'. 'Business Strategy and the Environment', 26(2), 133-145.

O'Brien, K., & Leichenko, R. (2009). 'The risks of climate change for business: A global perspective'. 'Business & Society Review', 115(1), 13-39.

Revesz, R. L., & Livermore, M. A. (2008). 'The role of international law in combating climate change'. 'Environmental Law Review', 10(4), 99-112.

Solomon, S., & Qin, D. (2007). 'Climate Change 2007: The Physical Science Basis'. Cambridge University Press.

Stern, N. (2007). 'The Economics of Climate Change: The Stern Review'. Cambridge University Press.

Stern, N., et al. (2006). 'The Economics of Climate Change: The Stern Review'. HM Treasury, London.

Task Force on Climate-related Financial Disclosures (TCFD). (2017). 'Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures'. TCFD.

Weber, A., et al. (2019). 'Market responses to climate change adaptation: The role of investor sentiment'. 'Journal of Sustainable Investment', 10(1), 15-33.

World Bank. (2016). 'Climate Change and the World Bank Group: A Strategic Framework for Action'. The World Bank.