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Corporate investment decisions amid climate risks: Relocate or stay?

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  • Ren, Yi-Shuai
  • Klein, Tony
  • Jiang, Yong

Abstract

The physical and transitional risks of climate change have garnered widespread attention. Based on data on companies listed in China’s A-shares from 2007 to 2022, we find that climate risks are positively associated with corporate cross-regional investment (CORI), particularly through transition risks rather than physical risks. Furthermore, non-heavily and non-politically connected firms, larger and more diversified firms, and those in the growth and maturity stages are more inclined toward CORI under climate risk. Mechanistic studies show that climate risk can positively impact CORI by increasing the financial pressure on firms and destabilising their supply chains. Furthermore, local government climate policies and better management amplify the impact of climate risks on CORI. Additionally, climate risk improves ESG performance and productivity, with CORI acting as the mediating channel.

Suggested Citation

  • Ren, Yi-Shuai & Klein, Tony & Jiang, Yong, 2025. "Corporate investment decisions amid climate risks: Relocate or stay?," Journal of International Money and Finance, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:jimfin:v:157:y:2025:i:c:s0261560625001238
    DOI: 10.1016/j.jimonfin.2025.103388
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