Climate Risk Premium and Corporate Debt Financing Costs: Evidence from China

Bingjie He

doi:10.54254/2754-1169/2025.BJ29566

Advances in Economics, Management and Political SciencesOpen access

Climate Risk Premium and Corporate Debt Financing Costs: Evidence from China

Research Article

Open Access

Climate Risk Premium and Corporate Debt Financing Costs: Evidence from China

Bingjie He ^1*

¹ University of Essex

^*Corresponding author: jacquelinejm1307@outlook.com

Published on 19 November 2025

AEMPS Vol.241

ISSN (Print): 2754-1177

ISSN (Online): 2754-1169

ISBN (Print): 978-1-80590-541-7

ISBN (Online): 978-1-80590-542-4

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Abstract

This study aligns with China's “dual carbon” strategy, focusing on A-share companies listed on both the Shanghai and Shenzhen stock exchanges from 2009 to 2023. This timeframe encompasses both the preparatory phase preceding the strategy's implementation and its subsequent impacts. This empirical analysis examines the impact of climate-related risks on corporate debt financing costs, while also investigating the underlying roles of intermediary channels and regional differences in this phenomenon. The study reveals that climate risks significantly elevate corporate debt financing costs, a phenomenon summarized as the “climate risk premium.” This conclusion remains robust across multiple tests—including alternative variable measurements and sample portfolio adjustments. Heterogeneity analysis reveals that enterprises in central and western regions exhibit greater sensitivity to financing cost fluctuations induced by climate risks compared to their eastern counterparts. Mechanistic assessment further confirms that climate risks propagate primarily through two pathways: first, accelerated depreciation of fixed assets diminishes collateral value (asset valuation channel); second, disrupted carbon disclosure exacerbates information opacity (information channel). Notably, the intermediary effect of the asset valuation channel is particularly pronounced at present. This study not only expands the interdisciplinary frontier between climate economics and corporate finance research but also provides critical empirical evidence: it assists governments in formulating specialized green finance regulations, supports financial institutions in building models that reflect dynamic climate pricing, and incentivizes enterprises to strengthen adaptive strategies for addressing the climate crisis.

Keywords:

Climate risk, Corporate debt financing cost, Carbon information disclosure, Regional heterogeneity, Fixed asset depreciation

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References

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References

[3]. Ginglinger, E., & Moreau, Q. (2023). Climate risk and capital structure. Management Science, 69(12), 7492–7516.

[5]. Jung, J., Herbohn, K., & Clarkson, P. (2018). Carbon risk, carbon risk awareness and the cost of debt financing. Journal of Business Ethics, 150(4), 1151–1171.

[8]. Zhang, X., Wan, G., Zhang, J., et al. (2020). Digital economy, financial inclusion and inclusive growth. China Economist, 15(3), 92–105. https: //doi.org/10.19602/j.chinaeconomist.2020.05.07

[9]. He, X., & Ma, J. (2022). Impacts of carbon neutrality on macroeconomic development. Financial Forum, 27(5), 3–7. https: //doi.org/10.16529/j.cnki.11-4613/f.2022.05.008

[10]. Matsumura, E. M., Prakash, R., & Vera-Muñoz, S. C. (2014). Firm-value effects of carbon emissions and carbon disclosures. The Accounting Review, 89(2), 695–724.

[11]. Li, J., Peng, Y., & Wang, W. (2023). Can green credit policies promote the development of green enterprises?—From the perspective of risk-taking. Financial Research, (3), 112–130.

Cite this article

He,B. (2025). Climate Risk Premium and Corporate Debt Financing Costs: Evidence from China. Advances in Economics, Management and Political Sciences,241,30-39.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICFTBA 2025 Symposium: Global Trends in Green Financial Innovation and Technology

ISBN: 978-1-80590-541-7(Print) / 978-1-80590-542-4(Online)

Editor: Lukáš Vartiak, Sun Huaping

Conference website: https://www.icftba.org/Beijing.html

Conference date: 20 November 2025

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.241

ISSN: 2754-1169(Print) / 2754-1177(Online)

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