Climate Change Risk and Firm Value under Corporate Social Responsibility Engagement

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Khan, Muhammad Asif
Bagh, Tanveer
Hull, Robert M.
Washburn University. School of Business
Kaw Valley Bank
Issue Date
August 2023
Alternative Title
Our firm-specific study offers a logical trajectory of tests to illustrate how a firm's climate change risk (CCR) can enhance firm value (FV). This trajectory begins by establishing a significant negative association between CCR and FV and a significant positive association between CCR and corporate social responsibility (CSR) engagement. Given this knowledge, we deduce that CSR engagement can have a possible net positive impact on FV. To confirm this possibility, we simultaneously test the dual impact of CSR engagement on FV consisting of (i) its direct impact on FV and (ii) its moderating impact on FV via reducing the negative influence of CCR on FV. We find that both impacts on FVare positive and significant. This indicates the potential capacity of CSR to overcome the negative impact of CCR on FV rendering a net outcome that is value-enriching. We conclude that decision-makers should undertake optimal CSR engagement to combat CCR so that they can achieve the ultimate outcome of maximum FV and global wealth within the confines of sustainable development.