Leaving the Cold Behind: The Role of Emotions and Cognitive Biases in Business Adaptation to Climate Change

Abstract

This article develops the argument that the interplay between emotions and cognitive biases influences corporate decision-making on climate change adaptation. Our theoretical analysis examines how emotions can change the effect of cognitive biases on adaptation decisions by influencing how firms select, access, and process complex and uncertain climatic information. We draw on research on climate adaptation, social psychology, and managerial cognition and focus on three forms of bias: availability heuristic, framing, and anchoring. We explain how each bias shapes the decision-making process on adaptation and theorize how emotions of different valence and arousal affect this process. We shed light on the underlying mechanisms that explain how emotions influence the effect of cognitive biases as a source of inaction on adaptation in firms. Our analysis provides a new perspective on how firms approach the strategic decision to adapt to climate change by considering both cognitive and emotional aspects.