The impact of climate risk on corporate innovation: Evidence from China

Climate risk has become a major challenge for the world. Based on data from Chinese A-share listed companies from 2011 to 2022, this study finds that climate risk significantly promotes corporate innovation. Both physical risk and transition risk have positive effects on product and process innovation, but their positive impact is stronger on process innovation. Specifically, physical risk is more conducive to process innovation, while transition risk is more beneficial to product innovation. Institutional pressure further strengthens this facilitating effect. Mechanistic analyses suggest that climate risk promotes corporate innovation through channels such as enhancing long-term development orientation, improving innovation efficiency, and facilitating green technology development. The findings remain robust after a series of robustness and endogeneity tests.