Observational analysis reveals climate vulnerability increases market volatility in firms, indicating financial constraints amplify this effect.
Key Points
Firms in more climate-vulnerable countries show significantly higher market volatility, with a robust association across various measures.
The analysis utilized panel data on 490 firms across 17 European countries over nine years, highlighting significant findings.
Financial constraints greatly intensify the relationship between climate vulnerability and market volatility, especially when measured with the Kaplan–Zingales index.
These findings underline the importance of addressing climate risk, as it primarily results in increased market uncertainty for firms.
Cite This Study
Enriquez-Perales et al. (2026) studied this question.