Yuqi Shao

Yuqi Shao

Oct. 30, 2026

Climate risk, Accuracy of analyst’s prediction, ESG performance, Information asymmetry, Regulatory effect.

This study draws on a sample of non-financial A-share listed firms in China from 2015 to 2024 to examine the impact of physical climate risk (CR) on the accuracy of sell-side analysts’ earnings forecasts and to test whether corporate environmental, social, and governance (ESG) performance plays a moderating role. CR is measured by the standardized deviation of the annual average temperature in the firm’s registered location from the historical baseline period of 1973-1982. Corporate sustainability practices are proxied by Huazheng ESG ratings. A fixed-effects panel model is employed, controlling for firm size (lnSize), profitability, ownership concentration, and other covariates. Empirical results show that greater regional climatic anomalies are significantly associated with larger analyst forecast errors (FERROR), indicating that climate shocks impair the information intermediation function of capital markets by exacerbating operational uncertainty and information asymmetry. A higher ESG rating effectively mitigates this adverse effect: for each one-point increase in the ESG score (on a 1-9 scale), the marginal impact of CR on forecast error declines by approximately 10.4%. This finding supports the view that ESG enhances the transparency of non-financial disclosures and builds reputational capital, thereby providing analysts with a more reliable informational foundation amid environmental disturbances. Robustness checks using a subsample further confirm the reliability of these conclusions.

© 2026, the Authors. Published by ISCCAC

This is an open access article distributed under the CC BY-NC license