Firm-level real climate risk, institutional investors, and green innovation

This paper examines how firm-level real climate risk affects its green innovation and how green institutional investors as well as long-term institutional investors impact this relationship using data for Chinese A-share listed firms in 2015–2022. We find that firm-level real climate risk facilitates its green innovation, and green institutional investors or long-term institutional investors strengthen this positive relationship. Our results demonstrate that the increasing firm-level real climate risk prompts institutional investors to intensify supervision and governance over firms, thereby enhancing managerial willingness to allocate corporate resources to green innovation. Overall, the findings highlight the significant role of institutional investors in addressing climate risk and promoting green innovation.