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Climate risk perceptions of businesses: The role of experience and objective risk factors

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  • Rieger-Fels, Markus

Abstract

The changing climate requires businesses to take adaptive action. A key prerequisite for optimal adaptive action is that businesses are aware of the climate risks that they face. This, in turn, necessitates that businesses do not base their risk perception solely on prior experience, or a lack thereof, but take objective risk factors into account. I use data from a large-scale survey of German businesses to investigate how they assess the acute physical climate risk presented by the increased frequency of natural hazards: droughts, storms, extreme heat, heavy precipitation, and floods. I find experience to have a large effect on the perceived probability of hazard events, but no effect on their perceived consequences. Objective risk criteria such as firm size, industry, and location characteristics inform expectations independent of experience and, depending on the hazard, even to a larger extent than experience. The results suggest that it might not be a lack of risk awareness that underlies any adaptation gap.

Suggested Citation

  • Rieger-Fels, Markus, 2025. "Climate risk perceptions of businesses: The role of experience and objective risk factors," Working Papers 01/25, Institut für Mittelstandsforschung (IfM) Bonn.
    • Handle: RePEc:zbw:ifmwps:311218
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    References listed on IDEAS

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    1. Frondel, Manuel & Simora, Michael & Sommer, Stephan, 2017. "Risk Perception of Climate Change: Empirical Evidence for Germany," Ecological Economics, Elsevier, vol. 137(C), pages 173-183.
    2. Gisela Wachinger & Ortwin Renn & Chloe Begg & Christian Kuhlicke, 2013. "The Risk Perception Paradox—Implications for Governance and Communication of Natural Hazards," Risk Analysis, John Wiley & Sons, vol. 33(6), pages 1049-1065, June.
    3. Shardul Agrawala & Maëlis Carraro & Nicholas Kingsmill & Elisa Lanzi & Michael Mullan & Guillaume Prudent-Richard, 2011. "Private Sector Engagement in Adaptation to Climate Change: Approaches to Managing Climate Risks," OECD Environment Working Papers 39, OECD Publishing.
    4. Martina K. Linnenluecke & Andrew Griffiths & Monika Winn, 2012. "Extreme Weather Events and the Critical Importance of Anticipatory Adaptation and Organizational Resilience in Responding to Impacts," Business Strategy and the Environment, Wiley Blackwell, vol. 21(1), pages 17-32, January.
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    More about this item

    Keywords

    Risk perception; risk management; climate risks; natural hazards;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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