A Study of the Factors Contributing to the Impact of Climate Risks on Corporate Performance in China’s Energy Sector

Yuping Song, Lu Lu, Jingxuan Liu, Jingyi Zhou, Xin Wang and Fangfang Li ()
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Yuping Song: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Lu Lu: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Jingxuan Liu: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Jingyi Zhou: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Xin Wang: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China
Fangfang Li: School of Finance and Business, Shanghai Normal University, Shanghai 200234, China

Sustainability, 2025, vol. 17, issue 11, 1-26

Abstract: As the climate crisis intensifies, corporate operations face unprecedented challenges from increasing climate risks, necessitating rigorous investigation into their resultant economic ramifications. This study employs text analysis and machine learning methods to construct climate risk perception indicators for a sample of China’s A-share listed energy sector firms (2014–2023). A two-way fixed effects panel model is then applied to study the impact of climate risk perception on corporate performance in the energy industry. The empirical results demonstrate that in China’s energy sector, a 1% rise in climate risk perception corresponds to a 0.104% decline in ROE, mediated through diminished financial flexibility (β = −0.075 **) and elevated R&D intensity (β = 0.649 ***). Moderating effect testing indicates that firms with higher levels of administrative spending effectively buffer against the adverse effects of heightened climate risk perception. Furthermore, this study shows that climate risk perception has more pronounced negative effects on corporate performance in state-owned enterprises (β = −0.113 **), heavily polluting enterprises (β = −0.131 *), carbon-intensive industries, and non-carbon trading pilot regions (β = −0.119 ***). These findings empirically demonstrate how climate risk perception reshapes corporate resource allocation and management, ultimately affecting performance. This study also proposes policy recommendations to enhance corporate climate risk responsiveness, promote technological innovation, accelerate the energy sector’s green transition, optimize corporate capital structure, and advance sustainable development goals.

Keywords: climate risk perception; corporate performance; energy industry; sustainable development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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