Firm Financial Exposure to Climate Change Risk and Short-term Debt Maturity

Abstract

This study examines whether firms’ financial exposure to climate change risk influences short-term debt maturity and whether biodiversity targets condition this relationship. Using firm-year data for Asian listed firms from 2001 to 2024 obtained from the LSEG Eikon database, we measure short-term debt maturity as the share of total interest-bearing debt maturing within one, two, and three years. We focus on two dimensions of climate exposure—transition and physical climate risk—and investigate how biodiversity targets interact with these risks in shaping maturity choices. Our results show that firms exposed to either transition or physical climate risk rely less on short-term debt, consistent with a refinancing-risk channel in which climate-related uncertainty increases rollover costs and strengthens incentives to extend maturities. Biodiversity targets are additionally associated with lower short-term debt shares, indicating more long-horizon and resilient financing policies among target-setting firms. Importantly, interaction estimates suggest that biodiversity targets attenuate the marginal effect of climate-risk exposure on short-term debt maturity, implying that nature-related commitments may operate as a credibility and risk-buffer mechanism in debt contracting. Overall, the findings highlight debt maturity as a key financial adjustment margin to climate risk and underscore the role of biodiversity-oriented strategies in shaping corporate financial resilience.