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Assessing the climate change exposure of foreign direct investment

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  • Xia Li

    (Boston University)

  • Kevin P. Gallagher

    (Boston University)

Abstract

This study deploys newly available data to examine the exposure of multinational companies’ overseas investments to physical climate risks. Globally, foreign investments are significantly exposed to lower physical climate risks, compared with local firms across countries. Within countries however, the differences of physical climate risks between foreign and local facilities are small. We also examine China, as it is fast becoming one of the largest sources of outward foreign investment across the globe. We find that foreign direct investment from China is significantly more exposed to water stress, floods, hurricanes and typhoon risks across countries, compared with other foreign facilities. Within host countries however, once again the physical climate risks of Chinese overseas facilities are comparable to those of non-Chinese foreign investments.

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  • Xia Li & Kevin P. Gallagher, 2022. "Assessing the climate change exposure of foreign direct investment," Nature Communications, Nature, vol. 13(1), pages 1-9, December.
    • Handle: RePEc:nat:natcom:v:13:y:2022:i:1:d:10.1038_s41467-022-28975-5
    DOI: 10.1038/s41467-022-28975-5
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    Cited by:

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    2. Chen, Yu & Zhao, Changyi & Chen, Shan & Chen, Wenqing & Wan, Kunyang & Wei, Jia, 2023. "Riding the green rails: Exploring the nexus between high-speed trains, green innovation, and carbon emissions," Energy, Elsevier, vol. 282(C).
    3. Fagbemi, Fisayo & Oke, Dorcas Funmilola, 2024. "Climate change vulnerability-foreign direct investment linkage: Why climate change preparedness matters in Sub-Saharan Africa," Research in Economics, Elsevier, vol. 78(1), pages 52-60.
    4. Chia‐Chi Lee & Shih‐Yun Kuo & Huang‐Hsiung Hsu & Tung‐Li Mo & En‐Yu Chang & Kuan‐Chun Huang, 2023. "How does the research community contribute to corporate climate‐related risk disclosures? The gap between ideals and reality," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 927-940, March.
    5. Yao An & Ning Liu & Lin Zhang & Huanhuan Zheng, 2022. "Adapting to climate risks through cross-border investments: industrial vulnerability and smart city resilience," Climatic Change, Springer, vol. 174(1), pages 1-29, September.

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