A forthcoming paper looks at how climate change impacts company values and offers a novel method to assess individual firms’ exposure to climate risks.
As the financial implications of climate change continue to soar, a forthcoming journal article explores its effects on company values.
Professor Henk Berkman (Business School) and co-authors Naomi Soderstrom (University of Melbourne) and Jonathan Jona (University of New Mexico) developed a novel way to figure out just how exposed individual companies are to climate risks using a detailed analysis of annual reports.
“There has been a real movement over the past decade to require firms to be forthcoming regarding their sustainability performance and climate risks,” says Professor Berkman.
“Companies are reporting on how climate change might impact their sales, their exposure to physical risks, all of those things, and our measure uses this detail and converts it into a number.”
That number, says Berkman, demonstrates how vulnerable a firm is to climate change.
“If a company is highly exposed to climate risks, a spike in climate anxiety due to a flood event or the release of a report by the Intergovernmental Panel on Climate Change, for example, t
