Climate Change and Adaptation in Global Supply-Chain Networks

Nora Pankratz and Christoph M. Schiller

No 2022-056, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines how physical climate risks affect firms' financial performance and operational risk management in global supply-chains. We document that weather shocks at supplier locations reduce the operating performance of suppliers and their customers. Further, customers respond to perceived changes in suppliers' climate-risk exposure: When realized shocks exceed ex-ante expectations, customers are 6-11% more likely to terminate existing supplier-relationships. Consistent with models of experience-based learning, this effect increases with signal strength and repetition, is insensitive to long-term climate projections, and increases with industry competitiveness and decreases with supply-chain integration. Customers subsequently choose replacement suppliers with lower expected climate-risk exposure.

Keywords: adaptation; production networks; firm performance; climate change (search for similar items in EconPapers)
JEL-codes: F64 G15 G30 Q54 (search for similar items in EconPapers)
Pages: 83 p.
Date: 2022-08
New Economics Papers: this item is included in nep-agr and nep-env
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2022-56

DOI: 10.17016/FEDS.2022.056

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