Introduction

Alex Boome:

Good day to our viewers and listeners from around the globe. Welcome to the Hinrich Foundation Trade Book Talk. I'm Alex Boome, Trade Education Program Director here at the Foundation. Today, we're pleased to be in discussion with Dr. Jonas Gamso, author of Multinational Corporations and Climate Change, Risks, Responsibilities, and Resilience. It's published by the Cambridge University Press.

We know climate change is transforming international business and global supply chains. We see it around us every day. But beyond extreme weather, global firms are navigating shifting regulatory frameworks, rising liability exposure, and evolving market expectations. Today, we'll explore four distinct forms of climate risk, and five strategies firms are using to manage them.

We'll examine shifts to industry practice, and address public policy, international governance, and the critical question of who should pay for climate resistance. Dr. Jonas Gamso is Deputy Dean of the Thunderbird Knowledge Enterprise, and an Associate Professor of Arizona State University's Thunderbird School of Global Management. He's also Senior Global Futures Scholar at the Julianne Wrigley Global Futures Laboratory. His research focuses on global political economy, international business risks, and sustainable development. Jonas, thank you very much for joining us today.

Jonas Gamso:

Thank you so much for having me, it's a pleasure to be here.

Big Idea & Origin Story

Alex Boome:	For decades, we've seen climate change debates focused primarily on sovereign pledges and multinational negotiations. What prompted you to approach climate disruption specifically through the lens of multinational businesses, corporate strategy, and foreign investment?
Jonas Gamso:	I started working on the book in 2022, and you'll recall there was devastating flooding in Pakistan. There were terrible storms and very significant floods that covered a significant portion of the country. Rightly so, the way this was covered in the media was as a humanitarian crisis. Because of my background in researching political risks to companies, especially multinational companies, I saw this flooding and thought to myself, this creates comparable, or even greater levels of risk to multinational companies as would a civil war, a coup, or a political crisis. I had this light bulb moment where climate risk is something we should be thinking and talking about—climate risk to companies, that is. If you had a company in Pakistan, or were thinking about investing in Pakistan at that time, you would have to be worried about the possibility of another intense storm and significant flooding, and what that means for physical and human infrastructure. That sent me on the journey that culminated in the publication of this book. What I learned along the way is that physical climate risk is a significant challenge for multinational companies. But climate risk is more complex than that. In addition, for innovative and forward-looking companies, climate change can present opportunities. I had the chance to explore this from a holistic perspective. That flooding is what sent me down this pathway and got me thinking about climate change and risk.
Alex Boome:	And it's even more relevant today, especially after the Nepal-Tibet disasters we've had with the flooding there.
Jonas Gamso:	Absolutely, the frequency and intensity of these storms is increasing.

Part 1: Climate Risks & Firm Strategies

Alex Boome:	In the first chapter, you establish that climate risk goes far beyond physical disasters. We've talked about the humanitarian and physical aspects, and you've identified four dimensions: physical, transition, litigation, and reputational. How do these four risks interact? Specifically, what are the transition and liability risks, and why are they becoming so urgent in corporate boardrooms today?
Jonas Gamso:	Physical climate risk is the thing we tend to notice the most as individuals. You see extreme storms, droughts, wildfires increasing, sea level rise, etc. This is obviously a very visible form of climate risk that can affect companies by damaging the infrastructure they rely on both their own vehicles and buildings, and the public infrastructure they rely on, such as ports, railroads, public roads, and bridges. It also affects human infrastructure; it's difficult for people to live and work in a place with no water, intense heat, or frequent storms. That's one dimension of climate risk. Transition risk involves societies changing the ways they operate and changing their policies in dramatic ways. We're going to see more of that going forward because of the threats and challenges associated with climate change.
Alex Boome:	We'll touch on litigation later, but could you give us an example of some transition risks?
Jonas Gamso:	This could be something like required CO2 emissions reporting that companies might have to do going forward, or something even more dramatic, like a requirement that societies and countries transition away from fossil fuels. There is a spectrum in terms of how significant these transition risks could be. It will vary from country to country, but they could be quite significant and threaten the very survival of the business models some companies are using.
Alex Boome:	Thank you.
Jonas Gamso:	The other risks, which you can even think of as subsets of transition risk, are litigation risk and reputation risk. For reputation risk, companies seen as irresponsible climate actors could suffer from boycotts or protests. Consumers or investors might decide they don't want to put their money into these companies, leading to reputational damage. We've seen instances of companies' reputations being negatively affected because of environmental damage. Litigation risk involves lawsuits against multinational companies seen as either exacerbating climate change or not taking enough action. These climate-related cases being filed have increased tremendously over the last few years, and there's every reason to expect they will continue to. All these risks are intertwined. If there is more extreme weather, we can logically expect new policies to be put into place, more reputational threats to companies, and potentially more litigation.
Alex Boome:	Would these cases come from the host country or a third-party investment company? Where would they originate?
Jonas Gamso:	Cases might come from civil society groups, NGOs, or organizations like Greenpeace. In other instances, they could come from individuals. There have been cases in the United States by coalitions of young people who say their future is endangered by climate change. Many of these cases are aimed at governments, but increasingly we're seeing them aimed at companies. Even if the companies aren't ultimately found liable, there's reputational damage and the costs of fighting lawsuits, which can be quite significant.
Alex Boome:	In Chapter 4, you outline five strategies to help manage these risks: accept, transfer, adapt, diversify, and avoid. Could you run us through that with a brief definition and some examples?
Jonas Gamso:	All of these strategies have pros and cons and shouldn't be thought of as mutually exclusive. The first strategy is to accept the risk and continue doing business as usual. We see this consistently, whether companies are unaware of the risks or face inertia that makes it difficult to change course. They continue operating in places vulnerable to climate change or engaging in carbon-intensive activities despite potential policy changes. The next strategy is to transfer the risk, getting climate risk insurance or passing the risk onto customers or suppliers. The climate risk insurance marketplace is not very developed, but it could become a more common strategy in the future. The third strategy is to adapt. Adapting to physical climate risk might mean shoring up infrastructure, building facilities with materials more resilient to extreme weather, preemptively shifting to alternative energy sources, or adopting low-carbon pledges in anticipation of policy change. The next strategy is to diversify, spreading assets and operations across locations so an incident in one place doesn't undermine the entire business strategy. The last strategy is simply to avoid risky markets altogether. Not all companies can do this; an oil and gas company has location-specific needs and must go where the resources are, even if there's risk. Avoiding markets also carries the risk of missing out on opportunities. It's up to every company to think strategically about what makes sense for their time horizons. There are opportunities to combine these strategies, such as accepting risk in some areas and adapting in others, depending on local regulations and risk profiles.
Alex Boome:	In the course of your research, are there trends you've noticed in how companies mix and match these choices, or does it depend entirely on the specific situation?
Jonas Gamso:	While you can identify companies doing all of these things, the strongest trend in the data is a systematic avoidance of the most climate-vulnerable countries. When we look at foreign direct investment data, we see foreign investors systematically avoiding these locations. This is a troubling result for the companies themselves, because they miss out on potential opportunities, and for those countries, because many of the most climate-vulnerable nations are developing countries that would benefit tremendously from deeper engagement in the global economy. Companies are hesitant to enter these markets because they are worried about the risks. This avoidance trend is quite pronounced, and one of the challenges I grapple with in the book is how to address it.

Part 2: Green Opportunities & The Energy Transition

Alex Boome:	Hopefully, some of these SMEs will be founded in climate risk mitigation, developing solutions we can apply on a broader scale. Now, in Chapter 5, you turn to the upside of climate disruption. So we've got opportunities here, sustainable business opportunities. You talk about early adopters, you mention green markets, and we look at these climate solutions. How can forward-looking firms turn these disruptions into a competitive advantage?
Jonas Gamso:	Wherever there is crisis or risk, there is opportunity. I differentiate three sorts of climate opportunities. The first is early adopters. These are companies that change the way they do business before their competitors, enjoying an early mover advantage by adopting greener practices. They might embrace carbon reporting or strict supply chain monitoring, incorporating green practices into their core business models without necessarily selling green services. The second is green markets. These are companies selling goods and services that will be more in demand as the climate transition accelerates, such as electric vehicles or renewable energies like wind and solar. These early movers can capture the market, build essential infrastructure, and even set the regulatory tone, just as Tesla's charging stations forced other companies to make their cars compatible. The third area is climate solutions. These are companies developing technologies specifically intended to help address climate change itself, such as carbon capture or carbon removal. We are at early stages with these technologies, and there is complexity and risk, but forward-thinking companies are investing because they see the future demand.
Alex Boome:	With companies taking advantage of these opportunities, there is conversation around greenwashing. Where does greenwashing fit into this, and how will it play out?
Jonas Gamso:	Greenwashing is a very real concern. In these early stages of innovation and growing consumer awareness, there is an incentive for companies to demonstrate their commitment to sustainability, whether genuinely or not. However, consumers are actually pretty good at spotting greenwashing. As a long-term strategy, it doesn't have staying power because poor practices get uncovered by journalism and transparent reporting. Eventually, the companies making genuine efforts will outnumber the greenwashers. Right now, during this transitional point, there is an incentive for companies to demonstrate sustainability in ways that may not be genuine.
Alex Boome:	If they are playing that game, there is definitely reputational risk involved.
Jonas Gamso:	Absolutely. It's almost better to stay under the radar than to put yourself on the radar and be shown as an actor lacking transparency.
Alex Boome:	In Chapter 6, you focus on the energy sector and present case studies of three energy firms taking distinct strategies: business as usual, diversification, and the pioneer. Could you discuss those strategies, the companies, and the implications of their approaches?
Jonas Gamso:	I look at the energy sector because fossil fuel companies are the most threatened by transition risk. Their very business models could be completely upended by decarbonization policies. The first company I look at is ExxonMobil, carrying out a 'business as usual' strategy. They've made some investments in carbon capture and storage to demonstrate efficiency, but at their core, they are leaning into their competency in oil and gas. It's a highly profitable, short-term, lower-risk strategy based on the sensibility that the world will continue needing oil and gas for the foreseeable future. The second strategy is diversification, illustrated by Saudi Aramco. They specialize in fossil fuels, keeping it as their trunk, but grow branches in solar, wind, green hydrogen, and carbon capture. It's a hedging strategy recognizing that while oil and gas are needed, green markets are growing rapidly, and renewables will eventually surpass fossil fuels. The third strategy is Ørsted, representing a pioneer of energy transition. They've shifted completely away from fossil fuels, and their business model is now exclusively wind energy. Moving away from their core competency involves significant short-term risk, and the new market has its own complexities, like pushback against wind energy. However, as an early mover undertaking this complete transition, they are positioned to corner the market.

Part 3: Public Policy, Global Governance & Equity

Alex Boome:	In Chapters 7 and 8, you focus on public policy. You mention that foreign investors avoid climate-vulnerable countries unless those countries can demonstrate governance readiness. Could you discuss some of the issues around that and the guidance for these companies?
Jonas Gamso:	Multinational companies have to be concerned about risk when making foreign direct investments because they are looking 10 to 15 years into the future. They look for signals and indicators that a country is willing and able to shore up infrastructure and ensure an orderly transition policy. They are looking for predictability and consistency. When governments demonstrate good governance mechanisms and infrastructure investment, they send a signal to foreign investors that the policy and physical environments will remain steady. This includes assurances that roads and bridges will be protected or that disaster management will be efficient. When that signal is present, investors are less inclined to avoid climate-vulnerable countries.
Alex Boome:	Are there emerging economies heading in the right direction, providing the stability multinationals are looking for?
Jonas Gamso:	Singapore has been thoughtful about these issues. Many East Asian countries are proactive because of their geographical vulnerability. A country like Indonesia is also thinking deeply about this. It is always a work in progress, especially for emerging markets facing resource limitations. However, many East and South Asian countries recognize the importance of this because they are both highly integrated into the global economy and very climate-vulnerable.
Alex Boome:	In Chapters 9 and 10 on international policy, you look at climate agreements and climate aid. How will this help unlock private capital, especially for developing economies?
Jonas Gamso:	Developing countries often lack the resources to shore up their resilience or demonstrate policy consistency independently. There is an ethical complexity here, as they are often the most vulnerable yet have contributed the least to climate change. International climate agreements and foreign aid provide a critical signal to multinational investors. Since foreign investors systematically avoid the most climate-vulnerable developing countries, these international mechanisms bridge the gap. International agreements signal a policy commitment to global sustainability standards, while climate aid signals that a government now has the financial resources to shore up infrastructure.
Alex Boome:	There has been a lot of pressure on global climate agreements. What impact will this pressure have on multinationals looking to invest in emerging economies?
Jonas Gamso:	We're living in a time with deserved controversies surrounding these international agreements and foreign aid. The agreements send a policy signal of consistency to investors, while foreign aid sends an infrastructure signal. Even if there are questions about effectiveness, these mechanisms function as essential signals for companies assessing risk. If an investor is weighing several risky markets, they will choose the one receiving international capital to shore up its infrastructure or the one visibly committed to sustainability standards. This protects them against reputational and transition risks. However, the current pressure on international institutions, like the United States pulling back from agreements or reductions in climate aid, is a major challenge. An unforeseen consequence of this withdrawal could be countries remaining unable to respond effectively to extreme weather, leading to less predictability for investors. This might result in a fractured form of globalization that leaves vulnerable countries behind. There is real urgency to ensure these institutions function well and correct past failures to maintain credibility.
Alex Boome:	And this brings in the private sector to bear part of their development, securing funds and investment from multinationals.
Jonas Gamso:	Exactly. Being proactive about managing climate change is not just an environmental issue; it has significant business implications. Protecting the environment is not at odds with global business. The reality is that failing to protect the environment and manage climate change will destroy opportunities for global companies and prevent us from building a prosperous world with distributed economic opportunities.

Final Takeaway

Alex Boome:	In your concluding chapter, you ask who should pay for climate resilience. Do you have takeaways from the book on that question?
Jonas Gamso:	It is an unfortunate irony that the countries most negatively affected by climate change are often poor, developing nations that contributed the least to it. Should they be responsible for shoring up their own infrastructure to attract investment? The answer requires shared stewardship. Multinational corporations, rich countries, and their citizens all have a role to play. We might see unorthodox strategies increasingly on the table, such as fossil fuel taxes or specific taxes on citizens in wealthy countries, similar to the Chirac tax on airline travel for humanitarian purposes. We need to think holistically about collectively managing the climate to create a more prosperous world.
Alex Boome:	What is your next book?
Jonas Gamso:	My next book will likely be a departure, but with a connected theme. There is much talk about great power competition, especially between the U.S. and China. The totalization of this competition is dangerous. I am hoping my next book will focus on the opportunities for great power cooperation. Cooperation helps prevent escalation, and we cannot solve global problems like climate change without cooperation between great powers.
Alex Boome:	My final question: what does your role as a Senior Global Futures Scholar at the Global Futures Laboratory entail?
Jonas Gamso:	It is a designation based on my work in sustainability and management at ASU. One of the great pleasures has been working with the UN Global Compact Network USA. Over the last several years, we've helped dozens of companies think about embedding sustainability into their core business models so it reinforces their success. This work shaped my thinking and reinforced the central theme of my book: being a sustainable business is good for business.
Alex Boome:	Being a sustainable business is good for business. That brings us to the end of our conversation on multinational corporations and climate risk. Jonas, it was a delight to speak with you today, and I look forward to reading your next book. Thank you so much.
Jonas Gamso:	Thank you, Alex. This was a real pleasure.