Proceedings of the 5th Management Science Informatization and Economic Innovation Development Conference, MSIEID 2023, December 8–10, 2023, Guangzhou, China

Research Article

A New Approach to Assess Climate Change Risk in Coal-Power Generation Sector

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  • @INPROCEEDINGS{10.4108/eai.8-12-2023.2344799,
        author={Liangliang  Li and Chenhao  Guo and Xinyong  Wang and Sian  Chen and Dan  Xia},
        title={A New Approach to Assess Climate Change Risk in Coal-Power Generation Sector},
        proceedings={Proceedings of the 5th Management Science Informatization and Economic Innovation Development Conference, MSIEID 2023, December 8--10, 2023, Guangzhou, China},
        publisher={EAI},
        proceedings_a={MSIEID},
        year={2024},
        month={4},
        keywords={climate change; transition risk; physical risk; esg risk; financial risk},
        doi={10.4108/eai.8-12-2023.2344799}
    }
    
  • Liangliang Li
    Chenhao Guo
    Xinyong Wang
    Sian Chen
    Dan Xia
    Year: 2024
    A New Approach to Assess Climate Change Risk in Coal-Power Generation Sector
    MSIEID
    EAI
    DOI: 10.4108/eai.8-12-2023.2344799
Liangliang Li1, Chenhao Guo2,*, Xinyong Wang3, Sian Chen3, Dan Xia3
  • 1: Ying Da Hui Tong Commercial Factoring Ltd.
  • 2: Beijing Zhongcai Green Financing Consultant Ltd
  • 3: State Grid Xiongan Financial Technology Group Co. Ltd.
*Contact email: harrison.guo@uwa.edu.au

Abstract

We propose a novel approach to identify and evaluate climate change risk in coal-power generation firms. This approach includes 92 indicators to assess climate change exposure from green transition, physical, ESG (Environmental, Social, and Governance), and financial dimensions. Based on these comprehensive risk exposure metrics, we calculate climate change risk exposure indices and categorize them into low, medium, and high levels. We implement this approach in the coal-power generation firms in China and obtain a series of insightful findings. For example, state-owned firms exhibit lower ESG risk and lower levels of technology risk. Firms in the eastern regions face lower risks related to fire, earthquake, and flooding but are more susceptible to hurricane risks. Shandong, Jiangsu, Shaanxi, Beijing, and Zhejiang demonstrate the highest overall transition risk. Guangxi, Yunnan, Sichuan, Hubei, and Hebei are exposed to the highest overall physical risk. Zhejiang, Inner Mongolia, Jiangsu, Shandong, Liaoning, and Anhui have the highest ESG risk. Firms in Inner Mongolia, Heilongjiang, Liaoning, Jilin, and Shandong are exposed to high financial risk, etc. Our findings generate practical implications for corporate managers to evaluate and integrate climate change risk into business strategies and policymakers to promote sustainable growth in the economy.