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Green investment strategies can unlock competitive edge

Prioritizing climate resilience, green technologies, and strategic diversification can provide companies with a powerful competitive advantage, according to an ACU study into investment behaviour in disaster-prone regions.

Research from Australian Catholic University and United Arab Emirates University found that publicly listed firms in high climate-risk regions tend to adopt overly conservative investment strategies, which in turn hinders their ability to achieve optimal investment efficiency.

Using an extensive dataset of more than 25,000 firms across 52 countries between 2007 and 2019, the study examined how the risk of typhoons, floods and other extreme weather events can shape investment decisions in emerging economies.

Published in Emerging Markets Review, it found that, without strong financial safety nets, firms in climate-vulnerable regions-such as Southeast and South Asia-adopt risk-averse strategies, such as holding more liquidity, relying on long-term debt, or reducing dividend payouts to buffer against financial uncertainty.

"These are major economic hubs, yet their investment landscape is often shaped by uncertainty due to climate risks," ACU's Peter Faber Business School lecturer Dr Adam Arian said.

Industries with significant fixed and long-term capital investments-energy, mining, communications, healthcare, and utilities-are the most exposed to climate-related disruptions, highlighting the need for proactive risk management.

The study underscores that investing in green technologies is not just an environmental imperative but a strategic necessity.

Other strategies towards more sustainable growth include building climate risk into financial planning, absorbing shocks by using financial tools like green bonds and insurance, diversifying supply chains and investing in infrastructure built to handle extreme weather.

"Companies that successfully navigate these challenges won't just survive-they will thrive, gaining a significant competitive advantage in attracting investment and sustaining long-term growth," Dr Arian said.

Dr Adam Arian is based in Brisbane, Australia, and is available for interview.

Media Contact: Damien Stannard, 0484387349, damien.stannard@acu.edu.au