Guest editorial: Climate change and business: challenges and innovations

Climate change remains a persistent global challenge, continuously reshaping the domains of business strategy, finance and governance. This special issue presents eight scholarly contributions that examine the complex and evolving interplay between climate change and business practices. The selected papers address a wide range of themes, including the influence of firms’ climate risk and opportunity exposure on their access to capital, the role of climate-related sentiment and policy uncertainty in shaping ESG decisions, the impact of state ownership, regulatory frameworks and macroeconomic policies on corporate environmental investment and carbon emissions reduction and the effect of climate risks on volatility in cryptocurrency markets.The eight articles featured in this issue collectively demonstrate the richness and diversity of scholarship at the intersection of climate, regulation, finance and management. They provide new theoretical insights, robust empirical evidence and practical implications for firms, investors and policymakers navigating a rapidly changing landscape.The first three papers investigate the role of state involvement, environmental regulations and macroeconomic policies in shaping corporate environmental engagement and investment behaviour. Lai et al. (2025) analyse the impact of state capital participation (SCP) on environmental engagement among listed firms in China. Their findings indicate that SCP significantly enhances environmental investment, ESG ratings and corporate visibility. Their findings also indicate that corporate environmental engagement deteriorates, especially in privately owned firms, after the exit of state shareholders.Farooq et al. (2025) explore the dynamic interplay between environmental regulations (ENR), green innovation (GNI), corporate cash and investment decisions across ten Asian economies. Their results show that while ENR tends to suppress investment, GNI has a positive effect. Moreover, cash reserves serve as a strategic buffer against regulatory shocks, suggesting that effective liquidity management is essential for navigating environmental policy pressures. However, the analysis also demonstrates a pronounced negative correlation between cash reserves and investment, indicating the presence of a crowding-out effect.Ozili (2025) extends the discussion to the macroeconomic level by examining how monetary and fiscal policies influence CO2 emissions across regional country groups. The study finds that contractionary policies, when combined with increased renewable energy consumption and strong institutional quality, can significantly reduce emissions. These findings underscore the importance of coordinated policy efforts in advancing climate goals and promoting sustainable economic development.The fourth and fifth papers in this special issue explore how climate-related risks and opportunities shape corporate financial outcomes, particularly within capital markets. Jin et al. (2025) introduce a novel firm-level metric for climate opportunity exposure and demonstrate its significant influence on the cost of capital among emerging market firms. Their findings reveal that equity investors tend to favor firms with greater exposure to climate-related opportunities, especially in countries characterized by high climate vulnerability and readiness. This underscores the strategic importance of identifying and leveraging climate opportunities to enhance financial performance.Feng and Huang (2025) examine the role of climate risk disclosure in attracting green investors. Through textual analysis of annual reports, they find that proactive climate disclosures significantly improve corporate reputation and ESG scores, thereby increasing the likelihood of green investment. Their study highlights the value of voluntary and transparent climate communication as a mechanism for signalling sustainability commitment and fostering investor confidence.The next two papers examine the influence of climate-related sentiment and policy uncertainty on corporate ESG decision-making and firm value. Dai and Jiang (2025) investigate the impact of climate policy uncertainty (CPU) on ESG performance among Chinese listed companies. Their rigorous empirical analysis demonstrates that firms exposed to higher levels of CPU tend to enhance their ESG performance as a strategic response to mitigate risk—particularly among non-state-owned enterprises and those operating in pollution-intensive sectors.Bagh et al. (2025) explore the effect of climate change sentiment (CCS) on firm value using a global sample. Their findings indicate that negative climate sentiment significantly undermines firm value, especially during periods of crisis. However, firms with robust ESG practices are better positioned to moderate this adverse impact. By integrating psychological sentiment analysis with corporate finance, the study offers valuable insights into how ESG practices can strengthen corporate resilience in the face of climate-related uncertainty.The final paper offers a novel perspective by examining the intersection of climate risks and cryptocurrency market dynamics. Ben Yaala and Henchiri (2025) investigate how physical and transition climate risks influence cryptocurrency volatility during crisis periods. Employing a fuzzy logic model, they find that acute climate events, such as hurricanes and wildfires, as well as long-term environmental disruptions, significantly increase volatility in major cryptocurrencies, particularly Bitcoin and Ethereum. Transition risks, including regulatory and technological shifts, also play a critical role in destabilizing crypto markets. This study introduces an innovative framework for incorporating climate risk into digital asset analysis and emphasizes the importance of sustainable investment practices and resilient regulatory approaches in the rapidly evolving landscape of financial technologies.Collectively, the eight papers featured in this issue shed light on how firms, investors and policymakers are responding to climate-related risks and opportunities through capital allocation, regulatory adaptation, information disclosure practices and ESG integration.The key themes emerging from this collection include the following:Looking ahead, future research could explore additional dimensions such as the role of corporate governance, firms’ digital transformation and the integration of advanced technologies, such as artificial intelligence and machine learning, in identifying, assessing and managing climate risks.As the IFRS S2 Climate-related Disclosures, issued by the International Sustainability Standards Board in June 2023, are being adopted across various jurisdictions, further studies could examine how IFRS S2 implementation influences firms’ climate-related strategies, reporting practices and stakeholder engagement.Moreover, sentiment analysis could be enriched by incorporating behavioral finance approaches to better understand how psychological factors and media narratives shape investor responses to climate events.Another promising avenue for inquiry lies in investigating the climate footprint of digital assets developed on blockchain platforms. Understanding the environmental implications of decentralized finance and tokenized economies will be crucial for shaping sustainable digital financial ecosystems.