How Firms Adapt to Climate Change: Evidence from the Developing World
As climate change intensifies, the private sector’s response—particularly in the agricultural sector—is a crucial determinant of resilience. This NBER study examines how firms in developing countries adjust their behavior in response to environmental shocks.
Main Insights: – Larger firms with greater access to finance tend to invest in climate-resilient infrastructure (e.g., irrigation, cold storage). – Firms in agro-processing and value chains respond faster than smallholder producers. – Risk management tools—like weather insurance—are critical but underutilized.
Policy and Private Sector Implications: – There’s a role for Rain and Hail Insurance and micro-insurance startups in expanding coverage. – Multinational buyers can support resilience by incorporating climate risk in procurement contracts.
Conclusion: This paper underscores that climate adaptation is uneven across firm sizes and sectors. Supporting access to finance, insurance, and predictive analytics can empower more firms to invest in resilience.