Climate Risk, Corporate Social Responsibility, and Firm Performance

Abstract

We examine the impact of climate risk on firm performance with a focus on the moderating role of corporate social responsibility (CSR). Further, we explore how the interaction between climate risk and CSR changes with national culture and religion. Our findings show that firms in countries with greater climate risks are associated with higher levels of CSR activities, possibly suggesting that firms respond to climate risks by engaging in more CSR activities. We then provide robust evidence that higher CSR significantly mitigates the performance-reducing impact of climate risk. Importantly, the moderating effect of CSR is more pronounced in countries characterized by low individualism and high religiosity. Overall, our findings provide an alternative perspective on the risk-management benefits of CSR, suggesting that CSR can be considered as a response to climate-change related risks for corporations.