Corporate responses to climate change risks: evidence from Australia

ABSTRACT This study aims to (1) explore the extent to which Australian companies respond to regulatory, physical and market risks associated with climate change, and (2) examine the impact of stakeholder pressure and corporate governance structure on the extent of corporate response to these risks. We collected survey data from 120 top risk managers of Australian companies. Our analysis shows that companies respond to regulatory risks to a greater extent than to physical and market risks. With respect to the impact of stakeholder pressure, the results show that overall, pressure from government, non-governmental organisations, competitors, and the media are positively and significantly associated with companies’ climate change risk responses. Disaggregated analyses show differences in how particular stakeholder groups’ pressure affects the corporate response to physical risks. With respect to corporate governance structure, the results demonstrate that female representation on the board of directors and existence of a climate change risk committee facilitate companies’ increased climate change risk response.