The impact of climate risk and policy on corporate financial performance: empirical evidence from Indian listed companies

Purpose The main objective is to examine the association between climate risk, climate policy and the corporate financial performance of Indian listed companies. It focuses on how climate risk and policy scores may enhance financial indicators such as enterprise value and market capitalization. Design/methodology/approach This study is an empirical analysis of 155 Indian listed companies in the Bombay Stock Exchange’s 200 Index. Data from the past four years (2021–2024) are used. The analysis employs balanced panel data and a fixed-effects model to examine the relationships among variables. Findings This study provides strong evidence that the government climate policy score is positively associated with enterprise value and market capitalization. Additionally, the government climate risk score negatively impacts market capitalization and enterprise value. Therefore, the study presents mixed results. Practical implications This study offers valuable insights for policymakers, researchers, business managers and society. Managers should carefully prioritize climate actions and incorporate environmental considerations into their decision-making processes. Policymakers can craft effective policies to promote sustainable practices among companies and encourage researchers to pursue interdisciplinary studies. Social implications This study increases public awareness of sustainability and societal norms. Originality/value This study examines the effects of the government climate risk score and government climate policy score on enterprise value and market capitalization in the Indian context.