ABSTRACT

Foreign direct investment (FDI) inflows are considered to be an important source of private financing for several emerging markets and developing economies (EMDEs). However, the high susceptibility of these countries to climate change impacts vis-à-vis their developed counterparts may reduce their attractiveness as a favourable destination for FDI inflows. EMDEs with significant exposure to physical climate risks present a higher incidence of financial risks for foreign investors, which may in turn discourage them from locating themselves in such jurisdictions where their profitability and operations could be jeopardized by climate disasters. Given this context, we empirically investigate how physical climate risks influence FDI inflows to 68 EMDEs using data from over two decades, from 1995 to 2017. We contribute to an emerging body of literature that assesses the impact of climate risks on macro-financial variables by focusing specifically on FDI inflows. Although we abstain from making strong causal claims in our paper, we account for endogeneity concerns extensively and our empirical results show that higher climate risks adversely impact FDI inflows to EMDEs. However, we find these negative effects can be mitigated to a significant degree by strengthening financial sector development in the host country, as it increases their capacity to absorb some of these climate risks more effectively.

Key policy insights

• Emerging markets and developing economies (EMDEs) that are more vulnerable and exposed to physical climate risks tend to be less attractive destinations for FDI inflows.

• Negative effects of physical climate risks on FDI inflows tend to be mitigated in EMDEs with a high degree of financial development.

• Well-developed, deep, and inclusive financial markets give EMDEs the capacity to absorb and manage various financial risks including those arising from climate change impacts.

摘要

外国直接投资（FDI）流入被认为是一些新兴市场和发展中经济体（EMDE）私人融资的重要来源。然而，与发达国家相比，这些国家对气候变化影响的高度敏感可能会降低它们作为外国直接投资流入的有利目的地的吸引力。面临重大自然气候风险的新兴市场和发展中经济体对外国投资者来说面临更高的金融风险，这反过来可能会阻碍他们将自己设在盈利能力和运营可能受到气候灾害危害的司法管辖区。在这种背景下，我们利用 1995 年至 2017 年二十多年来的数据，实证研究了自然气候风险如何影响 68 个新兴市场经济体的 FDI 流入。我们通过专门关注外国直接投资流入，为评估气候风险对宏观金融变量的影响的新兴文献做出了贡献。尽管我们在论文中没有做出强有力的因果论断，但我们广泛考虑了内生性问题，并且我们的实证结果表明，较高的气候风险会对流入新兴市场经济体的外国直接投资产生不利影响。然而，我们发现，通过加强东道国的金融部门发展，可以在很大程度上减轻这些负面影响，因为这可以提高东道国更有效地吸收部分气候风险的能力。我们广泛考虑了内生性问题，我们的实证结果表明，较高的气候风险会对新兴市场和发展中经济体的外国直接投资流入产生不利影响。然而，我们发现，通过加强东道国的金融部门发展，可以在很大程度上减轻这些负面影响，因为这可以提高东道国更有效地吸收部分气候风险的能力。我们广泛考虑了内生性问题，我们的实证结果表明，较高的气候风险会对新兴市场和发展中经济体的外国直接投资流入产生不利影响。然而，我们发现，通过加强东道国的金融部门发展，可以在很大程度上减轻这些负面影响，因为这可以提高东道国更有效地吸收部分气候风险的能力。

关键政策见解

• 新兴市场和发展中经济体 (EMDE) 更容易受到气候风险的影响，因此对于 FDI 流入的吸引力往往较低。

• 在金融发展程度较高的新兴市场和发展中经济体中，自然气候风险对 FDI 流入的负面影响往往会减轻。

• 发达、深入和包容的金融市场使新兴市场经济体有能力吸收和管理各种金融风险，包括气候变化影响引起的风险。