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Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia

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  • Edward B. Barbier

    () (Department of Economics, Colorado State University, Fort Collins, CO 80523-1771, USA)

  • Joanne C. Burgess

    () (Department of Economics, Colorado State University, Fort Collins, CO 80523-1771, USA)

Abstract

Businesses, investors, and insurers are requiring better quantitative assessments of their exposure to climate risks and their impact on climate change. They are incorporating these assessments in their day-to-day management and long-term investment decisions. Already, there are efforts to develop international guidelines, common policies and legal frameworks for such assessments, as well as the desire to foster climate financing. We examine recent progress in East Asia and the rest of the world in setting targets, pricing policies, and other mechanisms to reduce climate risks. We develop a model that demonstrates how reduced climate risk management may lower the total cost of capital of firms, thus making them more attractive to investors. We discuss the additional policies needed to support improved climate risk management in investment decisions, private investments in climate science, technology and innovation (STI) expansion, and more widespread adoption of climate financing and principles. Central banks, financial authorities, and governments can advance this objective by creating financial incentives to support investment decision-making. This would take into account factors such as improving climate performance, establishing better climate risk management and reporting requirements to foster green STI, and developing international guidelines and common policy and legal frameworks to support better climate risk management, assessments and reporting.

Suggested Citation

  • Edward B. Barbier & Joanne C. Burgess, 2017. "Innovative Corporate Initiatives to Reduce Climate Risk: Lessons from East Asia," Sustainability, MDPI, Open Access Journal, vol. 10(1), pages 1-17, December.
  • Handle: RePEc:gam:jsusta:v:10:y:2017:i:1:p:13-:d:123875
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    References listed on IDEAS

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    1. Diego Pérez-López & Ana Moreno-Romero & Ralf Barkemeyer, 2015. "Exploring the Relationship between Sustainability Reporting and Sustainability Management Practices," Business Strategy and the Environment, Wiley Blackwell, vol. 24(8), pages 720-734, December.
    2. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
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    5. Li Cai & Jinhua Cui & Hoje Jo, 2016. "Corporate Environmental Responsibility and Firm Risk," Journal of Business Ethics, Springer, vol. 139(3), pages 563-594, December.
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    Citations

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    Cited by:

    1. Nor Azah Abdul Aziz & Tze San Ong & Soon Yau Foong & Rosmila Senik & Hassan Attan, 2018. "Green Initiatives Adoption and Environmental Performance of Public Listed Companies in Malaysia," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-14, June.

    More about this item

    Keywords

    climate risk; corporate initiatives; climate finance; green science; technology and innovation (STI); East Asia;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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