Turning pressure into power: climate risk exposure and corporate green transformation

Climate risk represents a systemic threat to global economic stability, forcing firms to fundamentally adapt. Drawing on risk-management and resource dependence theories, this study investigates how climate risk exposure (CRE) reshapes corporate green transformation (GT) using a panel of Chinese A-share non-financial firms (2016–2024). Our results indicate that elevated CRE acts as a disciplining force, significantly accelerating corporate GT. Mechanism analyses reveal that firms respond to this exposure strategically by advancing green technological innovation and improving environmental, social, and governance (ESG) performance. Furthermore, this positive effect is amplified under specific boundary conditions: robust internal digital capabilities, accessible supply chain finance, and active monitoring by institutional investors. Heterogeneity analyses demonstrate that this proactive transition is more pronounced among state-owned enterprises, large corporations, and firms in regions with high public environmental awareness. By quantifying this behavioural response, this study suggests that external climate pressure catalyzes internal sustainable power, providing micro-level evidence for differentiated policy interventions.Footnote11 Abbreviations: green transformation (GT); climate risk exposure (CRE); World Meteorological Organization (WMO); Intergovernmental Panel on Climate Change (IPCC); Task Force on Climate-related Financial Disclosures (TCFD); Network for Greening the Financial System (NGFS); Environmental, Social, and Governance (ESG); China Research Data Services Platform (CNRDS); China Stock Market & Accounting Research (CSMAR); Management Discussion and Analysis (MD&A); propensity score matching (PSM); two-stage least squares (2SLS); two-stage instrumental variables generalized method of moments (2SIV-GMM); difference-in-differences (DID); state-owned enterprises (SOEs); small and medium-sized enterprises (SMEs).