Corporate responses to climate change risks: evidence from Australia

ABSTRACT

This study aims to (1) explore the extent to which Australian companies respond to regulatory, physical and market risks associated with climate change, and (2) examine the impact of stakeholder pressure and corporate governance structure on the extent of corporate response to these risks. We collected survey data from 120 top risk managers of Australian companies. Our analysis shows that companies respond to regulatory risks to a greater extent than to physical and market risks. With respect to the impact of stakeholder pressure, the results show that overall, pressure from government, non-governmental organisations, competitors, and the media are positively and significantly associated with companies’ climate change risk responses. Disaggregated analyses show differences in how particular stakeholder groups’ pressure affects the corporate response to physical risks. With respect to corporate governance structure, the results demonstrate that female representation on the board of directors and existence of a climate change risk committee facilitate companies’ increased climate change risk response.

KEYWORDS:

• Climate change
• regulatory risk
• physical risk
• market risk
• stakeholder pressure
• corporate governance

Acknowledgements

The authors are grateful for the assistance and support that many industry practitioners and academic colleagues provided for the study. In particular, guidance from Emeritus Professor Graeme Harrison and Associate Professor Parmod Chand is greatly appreciated.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this study are available on request from the corresponding author, Jinhua Chen (JC). The data are not publicly available due to their containing information that could compromise the privacy of research participants.