Climate risk perception and corporate ESG performance: evidence from China

Purpose This study examines the impact of climate risk perception on corporate environmental, social and governance (ESG) performance from a microfirm perspective. Design/methodology/approach Using a sample of Chinese listed companies from 2009 to 2021, we constructed corporate climate risk perception indicators based on the Management Discussion and Analysis (MD&A) in the annual reports of the companies, and analyzed it using ordinary least squares regression. Findings The results show that climate risk perception improves corporate ESG performance by encouraging green innovation. Heterogeneity analysis suggests that the greater the magnitude of climate risk shocks to the firms, the stronger the risk coping ability and the weaker the environmental regulation, the more pronounced the improvement of climate risk perception on corporate ESG performance. Furthermore, economic consequence analysis shows that the enhancement effect of climate risk perception on corporate ESG performance contributes to increasing corporate value. Originality/value This study emphasizes the significance of corporate climate risk perception in enhancing ESG performance. It provides a theoretical basis for enterprises to respond to climate risk and sustainable development.