Journal
SUSTAINABILITY SCIENCE
Volume 17, Issue 5, Pages 1723-1740Publisher
SPRINGER JAPAN KK
DOI: 10.1007/s11625-022-01199-8
Keywords
Climate risks; Developing countries; FDI; National governance
Funding
- National Natural Science Foundation of China [71974159, 72022020]
- National Natural Science Foundation of China Young Scientists Fund [72103171]
- 111 Project [B16040]
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This study investigates the impact of climate risks on foreign direct investment (FDI) inflows to developing countries and how governments can respond to this effect. The results show that both physical risk and transition risk reduce FDI inflows, and better national governance can alleviate these negative impacts. These findings provide important implications for authorities in tackling climate challenges.
This study investigates to what extent climate risks can affect foreign direct investment (FDI) inflows to developing countries and how their governments may respond to this effect. Using national level data between 2004 and 2018 for 108 countries, we estimate the impacts of two types of climate risks, namely physical risk measured by a vulnerability index and transition risk measured by carbon dioxide damage. The results show that both climate risks reduce FDI inflows during the sample period. We further find that better national governance can alleviate these negative impacts. These findings provide important implications to authorities that improving governance can effectively help these countries cope with climate challenges.
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