Bridging Vulnerability and Readiness: ESG Disclosure and Climate Change Adaptation in GCC Countries

The rising urgency of climate change has resulted in the need for corporations to embrace effective climate‐related strategies to achieve the goals of global sustainability. ESG has become a key strategy through which companies have been advised to promote their corporate responsibilities as well as climate change adaptation. Despite the availability of studies on the link between ESG performance and climate change adaptation, there has been limited empirical evidence for this relationship in the context of Gulf Cooperation Council (GCC) countries. This study aims at investigating the impact of ESG performance on climate change adaptation among publicly listed companies in the GCC. The study employs an unbalanced panel data of 393 firms, which consists of 1714 firm‐year observations over the period of 2014–2024. We apply the two‐step System Generalized Method of Moments (System GMM) estimator to control for endogeneity, dynamic panel biases, and heterogeneity. The results of the study indicate that aggregate ESG performance enhances the climate change adaptation among companies operating in the GCC countries. Moreover, the environmental, social, and governance components of ESG all have a positive and significant effect on the climate change adaptation, suggesting that companies which demonstrate better sustainability practices are more likely to adapt climate change‐related initiatives, manage their climate risks more efficiently, and make climate change‐related disclosure improvements. These results point out the necessity to incorporate ESG practices into business strategies in order to speed up climate‐related actions and promote sustainable development. The study makes an important contribution to the existing literature on ESG and climate change as it provides empirical evidence from one of the most carbon‐intensive parts of the world.