Climate risk and private participation projects in infrastructure: Mitigating the impact of locational (dis)advantages

Abstract

Purpose

The purpose of this paper is to investigate the impact of climate risk on the success vs failure of foreign direct investments (FDIs) in private participation infrastructure (PPI) projects. The authors also consider the extent to which project-level characteristics mitigate such risks.

Design/methodology/approach

The authors study a sample from the World Bank covering 18,846 projects in 111 countries from 2004 to 2013. The authors apply logistic regressions to determine the impact of climate risk and mitigating project characteristics on project failure.

Findings

The authors find that higher levels of climate risk at the host country level are associated with higher risk of project failure. The authors also find that the disadvantage of higher climate risk is weakened by two project-level characteristics, namely, the inclusion of host government ownership in the project consortium and the size of the project.

Originality/value

The research contributes to the current debate about the impact of climate risks on international business ventures. The authors demonstrate that climate risk is a locational disadvantage for FDI in PPI projects. The authors establish that the “fittest” projects in locations characterized by higher climate risk tend to be those that involve host government participation in their ownership structure as well as those of larger sizes.

Citation

Lupton, N.C., Jiménez, A., Bayraktar, S. and Tsagdis, D. (2021), "Climate risk and private participation projects in infrastructure: Mitigating the impact of locational (dis)advantages", Management Decision, Vol. 59 No. 1, pp. 51-67. https://doi.org/10.1108/MD-02-2019-0236