The impact of climate-related risks on firm performance: evidence from the healthcare sector

Purpose This paper aims to explore the impact of climate-related risks on corporate performance, specifically within the healthcare sector. Design/methodology/approach It analyses three key factors: climate risk physical leverage, government climate risk scores and environmental performance scores, using global data from 977 firm observations across 51 countries and 169 sectors, sourced from Bloomberg. The study incorporates legitimacy theory, stakeholder theory and signaling theory to understand how businesses respond to climate-related challenges. Findings The results show that increased physical climate risk leverage is positively associated with improved firm performance, while higher government climate risk scores tend to decrease performance. Additionally, firms with stronger environmental performance scores exhibit better financial outcomes. For policymakers, these findings highlight the need for robust climate-related regulations. The paper also underscores the importance of International Financial Reporting Standards (IFRS) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. These frameworks provide a standardized approach for businesses to disclose climate-related risks, fostering greater transparency and enabling informed decision-making by investors and stakeholders. Originality/value By incorporating TCFD recommendations into regulatory frameworks, policymakers can promote more consistent and reliable disclosures, aiding firms in addressing climate risks and enhancing their long-term resilience, particularly in sectors like healthcare, where climate-related challenges are increasingly critical.