Environmental innovation and climate risk awareness: The moderating role of SDG13

Our study examines the relationship between a firm's climate risk awareness and environmental innovation, aiming to determine how climate risk influences its competitive advantage. We further highlight the importance of SDG13: Climate Action in this relationship. Based on a sample of 22,820 firm-year observations from 45 counties during 2013-2022, the results show a positive relationship between a firm's climate risk awareness and environmental innovation. Climate risk awareness accounts for a firm's engagement in product- and process-based environmental innovations. However, SDG13 is only relevant in shaping a firm's product environmental innovation in the presence of climate risk awareness. These results confirm the disciplinary effect of climate risk on firm innovation. Our findings provide regulators and other stakeholders with a better understanding of creating an enabling environment for a beneficial climate risk management process.