Firm performance

Climate change and business performance

Rogue Waves: Climate Change and Business Performance


Serhan Cevik; Fedor Miryugin

Publication date:

May 27, 2022

Electronic access:

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Disclaimer: IMF Working Papers describe ongoing research by the author(s) and are published to elicit comment and encourage debate. The opinions expressed in IMF Working Papers are those of the authors and do not necessarily represent the views of the IMF, its Board of Directors, or IMF management.


Climate change is an existential threat to the global economy and financial markets. Many books document the potential macroeconomic consequences of climate change, but firm-level empirical research on how climate change affects firm performance remains scarce. This paper aims to fill this gap by empirically investigating the impact of climate change vulnerability on firm performance using a large panel data set of over 3.3 million non-financial firms from 24 developing countries over the period 1997-2019. We find that non-financial firms operating in countries more vulnerable to climate change tend to have difficulty accessing debt financing, even at higher interest rates, while being less productive and less profitable than businesses in countries less vulnerable to climate change. We confirm these results with alternative measures of vulnerability to climate change. Furthermore, the partitioning of the sample reveals that these effects are significantly greater for smaller firms, particularly in high-risk sectors and countries and countries with lower capacity to adapt and mitigate the consequences. of climate change.