Relationship Between Climate Risk and Physical and Organizational Capital

We investigate the relationship between climate risk and corporate investment in physical and organizational capital using an international sample of firms from 39 countries. Our main findings show that climate risk is positively associated with physical capital but is negatively related to organizational capital. We also explore the effects of climate vulnerability on these relationships and find that the positive relationship between climate risk and physical capital is mainly driven by climate-nonvulnerable industries, while the negative relationship between climate risk and organizational capital is principally driven by climate-vulnerable industries. Overall, our findings have significant implications for both domestic and multinational enterprises that engage in long-term investments against the background of climate change.