The Impact of Climate Change Risks on Firm Value: Evidence from the Korea

This study examines the relationship between climate change risks and firm value using listed Korean companies that are subject to the Target Management System from 2011 to 2015. The proxies of climate change risks are levels of greenhouse gas emissions and energy consumption, and the proxy of firm value is the Tobin’s Q. We find that higher levels of greenhouse gas emissions and energy consumption have a greater negative impact on firm value. Moreover, these relationships are stronger in the group of industries with high climate change risks. This study presents evidence that climate change risks may also have an impact on the value of companies in newly industrialized countries. We try to minimize self-selection bias by using greenhouse gas emissions and energy consumption data disclosed in accordance to the local law. Lastly, this study can be used to lay the foundation for policy making by confirming that making efforts to cut greenhouse gas emissions and energy consumption to levels lower than the industry average is important.