![Open Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextgreen.png)
![Restricted Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextred.png)
![Open Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextgreen.png)
![Open Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltext_open_medium.gif)
![Restricted Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextred.png)
![Restricted Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltext_restricted_medium.gif)
Climate Risk and Financial Performance of Energy Companies – A Cross-Country Analysis
Subscribe/Renew Journal
Climate change imposes greater physical, transitional, as well as regulatory risks, on the firm’s financial and operational activities. However, while evaluating the performance of the firms, the traditional financial performance indicators do not incorporate climate risk. Without integrating climate risk in the traditional performance indicators, the firms may be misleading the investors and other stakeholders by claiming higher achievement and better performance. Hence, this paper has tried to examine the firm’s performance after integrating climate risk with the traditional financial indicators. Our results provide evidence that climate risk significantly affects the financial performance of firms. More specifically, energy companies from developing countries are more exposed to climate risk, than those located in developed countries. The study also revealed that companies from the developed countries have generated a higher amount of revenue and profit, but they (except Australia) are not able to transfer the company’s methods of working to lower emissions production.
Keywords
Climate Risk, Integrated Ratios, Financial Performance, Energy Industry
Subscription
Login to verify subscription
User
Font Size
Information
- Abreu, M. C. S. de, Webb, K., Araújo, F. S. M., & Cavalcante, J. P. L. (2021). From “business as usual” to tackling climate change: Exploring factors affecting low-carbon decision-making in the Canadian oil and gas sector. Energy Policy, 148, 111932.doi:https://doi.org/10.1016/j.enpol.2020.111932
- Alsaifi, K., Elnahass, M., & Salama, A. (2019). Carbon disclosure and financial performance: UK environmental policy. Business Strategy and the Environment, 29(2), 711-726. doi:https://doi.org/10.1002/bse.2426
- Arnell, N. W., Kay, A. L., Freeman, A., Rudd, A. C., & Lowe, J. A. (2021). Changing climate risk in the UK: A multi-sectoral analysis using policy-relevant indicators. Climate Risk Management, 31, 100265.doi:https://doi.org/10.1016/j.crm.2020.100265
- Berkman, H., Jona, J., & Soderstrom, N. S. (2021, 25 March). Firm-specific climate risk and market valuation. Retrieved from https://ssrn.com/abstract=2775552 or doi:http://dx.doi.org/10.2139/ ssrn.2775552
- Boadi, S. A., & Owusu, K. (2017). Impact of climate change and variability on hydropower in Ghana.African Geographical Review. doi:10.1080/193768 12.2017.1284598
- Contreras-Lisperguer R., & Cuba de, K. (2008). The potential impact of climate change on the energy sector in the Caribbean region. Organization of American States.
- Cruz, A. M., & Krausmann, E. (2013). Vulnerability of the oil and gas sector to climate change and extreme weather events. Climatic Change, 121, 41-53.doi:https://doi.org/10.1007/s10584-013-0891-4
- Dahl, T., & Flottum, K. (2019). Climate change as a corporate strategy issue: A disclosure analysis of three climate reports from the energy sector. Corporate Communications: An International Journal, 24(3), 499-514. doi:https://doi.org/10.1108/ CCIJ-08-2018-0088
- Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015).Dynamics of environmental and financial performance. Organization & Environment, 28(4), 374393. doi:https://doi.org/10.1177/1086026615620238
- Engels, P. D. A., Kunkis, M., & Altstaedt, S. (2020). A new energy world in the making: Imaginary business futures in a dramatically changing world of decarbonized energy production. Energy Research & Social Science, 60, 101321. doi:https://doi.org/10.1016/j.erss.2019.101321
- Gerlak, A. K., Weston, K., McMahan, B., Murray, R. L., & Mills-Novoa, M. (2018). Climate risk management and the electricity sector. Climate Risk Management, 19, 12-22. doi:https://doi.
- org/10.1016/j.crm.2017.12.003
- Huang, H. H., Kerstein, J., & Wang, C. (2017). The impact of climate risk on firm performance and financing choices: An international comparison. Journal of International Business Studies, 49(5), 633-656.doi:https://doi.org/10.1057/s41267-017-0125-5
- Jianfei, S., Song, X., Ming, Z., Yi, W., Yuejin, W., Xiaoli, L., & Zhijie, W. (2014). Low-carbon development strategies for the top five power generation groups during China’s 12th Five-Year Plan period.
- Renewable and Sustainable Energy Reviews, 34, 350- 360. doi:https://doi.org/10.1016/j.rser.2014.03.029
- Khan, M. K., Khan, M. I., & Rehan, M. (2020). The relationship between energy consumption, economic growth and carbon dioxide emissions in Pakistan. Financial Innovation, 6(1). doi:https:doi. org/10.1186/s40854-019-0162-0
- Mirza, F. M., & Kanwal, A. (2017). Energy consumption, carbon emissions and economic growth in Pakistan: Dynamic causality analysis. Renewable and Sustainable Energy Reviews, 72, 1233-1240.
- doi:https://doi.org/10.1016/j.rser.2016.10.081
- Moyo, M., & Wingard, H. C. (2015). An assessment of the impact of climate change on the performance of South African companies. Journal of Governance and Regulation, 4(2), 49-62. Retrieved from https://virtusinterpress.org/IMG/ pdf/10-22495_jgr_v4_i2_p5.pdf
- Nakao, Y., Amano, A., Matsumura, K., Genba, K., & Nakano, M. (2007). Relationship between environmental performance and financial performance: An empirical analysis of Japanese corporations.
- Business Strategy and the Environment, 16, 106- 118. doi:https//doi.org/10.1002/bse.476
- Nikolaou, I., Evangelinos, K., & Leal Filho, W. (2015). A system dynamic approach for exploring the effects of climate change risks on firms’ economic performance. Journal of Cleaner Production, 103, 499-506.doi:http://dx.doi.org/10.1016/j.jclepro.2014.09.086
- Ozturk, I., & Acaravci, A. (2010). CO2 emissions, energy consumption and economic growth in Turkey.Renewable and Sustainable Energy Reviews,14(9), 3220-3225. doi:https://doi.org/10.1016/j.
- rser.2010.07.005
- Rahman, M. M., & Kashem, M. A. (2017). Carbon emissions, energy consumption and industrial growth in Bangladesh: Empirical evidence from ARDL cointegration and Granger causality analysis. Energy
- Policy, 110, 600-608. doi:https://doi.org/10.1016/j. enpol.2017.09.006
- Sun, Y., Yang, Y., Huang, N., & Zou, X. (2020). The impacts of climate change risks on financial performance of mining industry: Evidence from listed companies in China. Resources Policy, 69, 101828.
- doi:https://doi.org/10.1016/j.resourpol.2020.101828
- U.S. Energy Sector Vulnerability to Climate Change and Extreme Weather. (2013). U.S. Department of Energy.
- Vidyarthi, H. (2013). Energy consumption, carbon emissions and economic growth in India. World Journal of Science, Technology and Sustainable Development,10(4), 278-287.
![](https://i-scholar.in/public/site/images/abstractview.png)
Abstract Views: 141
![](https://i-scholar.in/public/site/images/pdfview.png)
PDF Views: 0