SIGNATURE WORK
CONFERENCE & EXHIBITION 2022

To examine the relationship between climate change impact and corporate climate mitigation innovations, this paper uses firm-level patents data for 2,822 publicly traded Chinese firms and daily temperature data from 360 Chinese cities from 1988 to 2016. After studying the economics and finance literature, this study adopts the methodology that measures the company’s exposure to climate change in terms of both the subsidiaries and the parent company’s exposure to temperature variations, which allows for a more accurate analysis of the impact of climate change on Chinese listed companies. The analysis of Ordinary Least Squares (OLS) regressions with fixed effects indicates that extreme cold weather encourages investments in environmental innovations, while extreme heat discourages such investments. In addition, the effects of temperature variation are stronger for all types of patents significant than just for environmental patents. This suggests that some types of patents are more effective than environmental patents in reducing firms’ climate change exposure. Finally, there seems to be a stronger incentive for firms to acquire environmental utility patents, which are less valuable than environmental invention patents, in response to temperature change effects.