How do firms cope with losses from extreme weather events?

Emanuela Benincasa, Frank Betz and Luca Gattini

No 2022/10, EIB Working Papers from European Investment Bank (EIB)

Abstract: We document the investment and financing decisions of firms that experience monetary losses due to extreme weather events. Our sample covers firms operating in 41 economies, mainly emerging and developing markets. Consistent with the need to either replenish damaged capital or to adapt to climate change, firms hit by extreme weather are more likely to invest in long-term assets. In addition, they are more likely to integrate climate-friendly measures in their production processes. Although these firms have higher needs for bank credit, they are not more likely to be credit constrained than the average firm. Nonetheless, they face higher loan rejection rates and they are more leveraged than otherwise comparable firms. This suggests that climate change has the potential to erode the quality of firm balance sheets over time.

Keywords: Physical climate risk; Extreme weather; Access to credit; Corporate investment (search for similar items in EconPapers)
JEL-codes: D22 G21 G32 L20 Q54 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-env and nep-sbm
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https://www.econstor.eu/bitstream/10419/261495/1/1811130275.pdf (application/pdf)

Related works:
Journal Article: How do firms cope with losses from extreme weather events? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:eibwps:202210

DOI: 10.2867/324845

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