Extreme weather and the green transition of energy firms: The moderating effect of digital technology and digital inclusive finance

Abstract

Amid the increasing frequency of extreme weather events, it is crucial to examine their impact on the green transition of Chinese energy systems and the internal mechanisms of this relationship. Drawing upon data from 277 Chinese energy firms listed from 2016 to 2021, this study investigates how extreme weather affects the green transition of the energy firms and investigates the moderating roles of digital technology and digital inclusive finance. Our analysis reveals a negative association between extreme weather and the green transition endeavors of energy firms, a relationship that withstands a battery of robustness checks. A further heterogeneity analysis shows that state-owned firms exhibit a relatively lower susceptibility to the negative impacts of extreme weather, whereas energy firms situated in metropolitan areas display heightened vulnerability. Intriguingly, our findings suggest that extreme weather may serve as a catalyst for the green transition in firms subjected to rigorous audit standards. Additionally, our results highlight that digital technology and digital inclusive finance play crucial moderating roles, both of which can effectively mitigate the negative effects of extreme weather on the green transition of energy firms. In light of these findings, we offer policy recommendations aimed at enabling the energy firms to navigate the green transition effectively amidst the challenges posed by extreme weather.