Climate change has moved beyond the realm of environmental policy to become a central force shaping global business strategy, financial decision-making, and economic governance. Firms and financial institutions now operate in an environment characterised by intensifying physical risks, such as extreme weather events, alongside expanding regulatory and transition pressures linked to decarbonisation and sustainability goals. As these risks and opportunities become more pronounced, understanding their influence on corporate behaviour, capital allocation, and market stability has become increasingly important. This collection of eight studies, published in China Finance Review International, responds to this challenge by examining how climate-related factors are reshaping firm-level strategies, investment dynamics, and financial markets across diverse institutional and geographic contexts.

Rather than presenting a single empirical investigation, the editorial draws together insights from a diverse body of research using a wide range of methodological approaches. These include quantitative analysis of firm-level financial and environmental data, textual and sentiment analysis of corporate disclosures, modelling of policy uncertainty, and evaluation of macroeconomic and regulatory frameworks. The studies span multiple settings, including China, emerging Asian economies, and global markets, enabling comparisons across different regulatory regimes and stages of economic development. Thematically, the research addresses the role of state capital and regulation in driving environmental investment, the financial implications of climate-related opportunities, the impact of climate sentiment and policy uncertainty on firm value and behaviour, and the growing intersection between climate risk and digital asset markets, particularly cryptocurrencies.

Several significant findings emerge from this body of work. State ownership plays a significant role in promoting environmental investment and improving ESG performance in China, suggesting that public capital can act as a catalyst for corporate sustainability. While environmental regulations may initially constrain corporate investment, firms with strong green innovation capabilities and sufficient cash reserves are better positioned to adapt over time. Exposure to climate-related opportunities is associated with a lower cost of capital, especially in countries that are more vulnerable to climate change, highlighting the financial benefits of aligning business models with the low-carbon transition. At the same time, transparent and credible climate disclosure enhances corporate reputation and attracts environmentally conscious investors. The research also demonstrates that heightened climate policy uncertainty encourages firms, particularly private and pollution-intensive ones, to strengthen ESG performance as a form of risk management. Although negative climate sentiment can depress firm value, robust ESG practices can provide some resilience. Beyond traditional finance, the studies show that both physical climate events and transition risks significantly increase volatility in cryptocurrency markets, indicating that digital assets are not insulated from climate-related disruptions.

Collectively, these findings underscore that climate change is now deeply embedded in financial valuation, risk pricing, and strategic decision-making. Climate considerations increasingly shape how capital is allocated, how investors assess firms, and how markets respond to uncertainty. This has important implications as jurisdictions move towards more standardised climate disclosure regimes, such as IFRS S2, and as policymakers seek to align financial systems with climate objectives. The research highlights the need for firms to proactively identify climate-related opportunities, strengthen ESG disclosure, and maintain strategic liquidity to withstand regulatory and physical shocks. Investors can draw on climate opportunity indicators and sentiment analysis to inform portfolio allocation, favouring firms that demonstrate credible sustainability practices. For policymakers and regulators, the findings underscore the importance of coordinated monetary, fiscal, and environmental policies, as well as the need to incorporate climate risk into oversight of both traditional financial markets and emerging digital asset classes.

More information: Badar Nadeem Ashraf et al, Guest editorial: Climate change and business: challenges and innovations, China Finance Review International. DOI: 10.1108/CFRI-09-2025-771

Journal information: China Finance Review International Provided by Shanghai Jiao Tong University Journal Center