The impact of climate policy uncertainty on corporate commitment to climate change action

Purpose The study's primary objective is to examine the impact of Climate Policy Uncertainty (CPU) on corporate commitment to climate change action. Furthermore, it explores whether the firms improve their carbon performance in response to increased uncertainty around climate policies. Design/methodology/approach The study uses a sample of S&P 500 firms for a period spanning from 2015 to 2021. It employs the ordered logistic and fixed effect regression models to test the hypotheses. Findings The study finds a positive likelihood of corporate commitment to climate change action amid increased CPU, but it varies with the firms' level of commitment towards climate change action. Firms with a low commitment tend to increase their efforts to negate the adverse effects of rising CPU, while firms with a high commitment are not concerned. The study also demonstrates a positive relationship between the CPU and carbon performance of the firm, indicating that increased CPU reduces firm-level carbon emissions. However, this relationship varies at different levels of corporate commitment to climate change action. Originality/value This study contributes to the existing literature by examining the effects of the CPU on corporate commitment to climate change action. The study is the first to enhance the understanding of firms' climate change-related response to CPU. Furthermore, the study reveals that the rising CPU improves the firm-level carbon performance.