Natural Disasters and Corporate Climate Change Policies

Abstract

Using county-level data on severe meteorological events in the United States, I show that controlling for fixed firm and county effects, the annual number of natural disasters sustained at a county significantly improve the rating of the climate change policies of a firm headquartered in that county. I examine three hypotheses that may explain this result. The evidence supports the hypothesis that experiencing natural disasters enhances beliefs in anthropogenic global warming and motivates managers to take climate-friendly actions. Finally, employing the instrumental variable method and a quasi-natural experiment, I show that climate ratings do not significantly affect firm performance.