Environmental innovation and climate risk awareness: The moderating role of SDG13

Our study examines the relationship between a firm’s climate risk awareness and environmental innovation, aiming to determine how climate risk influences its competitive advantage. We further highlight the importance of SDG13: Climate Action in this relationship. Based on a sample of 22,820 firm-year observations from 45 counties during 2013–2022, the results show a positive relationship between a firm’s climate risk awareness and environmental innovation. Climate risk awareness accounts for a firm’s engagement in product- and process-based environmental innovations. However, SDG13 is only relevant in shaping a firm’s product environmental innovation in the presence of climate risk awareness. These results confirm the disciplinary effect of climate risk on firm innovation. Our findings provide regulators and other stakeholders with a better understanding of creating an enabling environment for a beneficial climate risk management process. • We find a positive relationship between firm climate risk awareness and environmental innovation. • Firm climate risk awareness enhances environmental innovation performance. • SDG13 Climate Action moderates the relationship between firm climate risk awareness and environmental innovation. • Climate risk awareness accounts for a firm’s engagement in product- and process- based environmental innovations