Climate Risks and Firm Value: Evidence From the Agribusiness Industry

ABSTRACT This study investigates how climate risks influence the firm value of agribusiness companies worldwide relative to firms operating in other sectors, emphasizing investors' responses to corporate climate risk management and exposure to climate‐related risks. Using firm‐level data from LSEG Data & Analytics for 2021–2024, the analysis covers approximately 39,000 firm‐year observations, of which 2299 are agribusiness firms. A panel‐data approach and instrumental variables estimators are employed to examine the relationship between firm value, emission‐reduction efforts, and exposure to physical and transition climate risks. The findings indicate a negative relationship between emission‐reduction efforts and firm value. However, agribusiness firms experience a more favorable market response relative to firms in other industries. Furthermore, exposure to physical and transition risks is associated with lower firm value, suggesting that investors perceive climate risks as undermining value creation. In the agribusiness subsample, emission‐reduction efforts and physical risk are negatively associated with firm value, while transition risk is not statistically significant.