Mitigating the Heat: The Role of AI Technology in Shielding Corporate Environmental Performance From Extreme Temperatures—Difference‐in‐Differences Evidence From Chinese Listed Firms

ABSTRACT Extreme heat has become a recurring operational challenge that disrupts production, raises energy and maintenance needs, and makes it harder for firms to sustain environmental performance. However, it remains less clear whether AI‐related capability is associated with firms' ability to maintain environmental performance under recurring extreme‐heat exposure. We develop a conceptual framework in which heat exposure diverts organizational attention and slack resources toward operational continuity, whereas AI‐related capability may support monitoring, prediction, coordination, and resource optimization. Empirically, using data from Chinese listed companies between 2011 and 2022, we employ a staggered difference‐in‐differences model to infer causal relationships. Specifically, AI‐related capability is proxied by AI‐related patents, extreme high temperature is defined as the occurrence of days exceeding 40°C, and environmental performance is derived from the environmental (E) component of third‐party ESG ratings. Our findings reveal that extreme heat significantly reduces corporate environmental performance. In the baseline intensity specification, one additional extreme‐heat day is associated with a 0.178‐point decline in firms' environmental performance score. However, in firms that have adopted AI technology, the negative effects are mitigated, with notable heterogeneity across industries. These findings suggest that AI‐related capability may act as resilience‐oriented intangible capital, helping firms reduce the environmental costs of operating under climate stress. The study adds to research on climate risk and ESG performance by providing evidence that AI‐related capability may condition firms' environmental vulnerability to recurring heat exposure, with practical implications for AI‐related innovation, digital capability building, and climate adaptation policy.