New Ideas Concerning Arts and Social Studies Vol. 9

Climate-related physical risk is increasingly material to firms through heat, floods, storms, water stress, asset damage, worker productivity, credit conditions and supply-chain disruption. Yet the economics of corporate adaptation remains fragmented across environmental economics, finance, management and operations research, while many observable responses are embedded in ordinary risk management rather than labelled as adaptation. This critical narrative review synthesises evidence on the costs of physical climate risk, the incentives and constraints that shape private adaptation, and the strategic behaviours through which firms seek to avoid, absorb, recover from or transform in response to climate exposure. Literature published from 1 January 2000 to 4 July 2026 was examined, with selective inclusion of earlier foundational work. The evidence indicates that climate shocks can reduce revenue, productivity and operating performance and can raise financing costs, but effect sizes vary sharply across settings and some high-income establishment-level studies find little average impact. Heterogeneity is economically central: size, productivity, financial access, managerial capability, institutional quality, prior experience and network position influence both vulnerability and adaptive capacity. Adaptation is consequently a portfolio problem under uncertainty rather than a single investment decision. Firms use liquidity buffers, operational slack, technology diversity, digital systems, supplier switching, risk management, climate planning and other adjustments, although evidence on their causal returns remains much thinner than evidence on climate damages. Private incentives are also incomplete guides to social resilience because firms can transfer risk to suppliers, workers, insurers, communities or the public sector. The review concludes that policy should focus on correcting information, finance, coordination and infrastructure failures while avoiding subsidies that merely socialise private losses. Research priorities include causal measurement of adaptation returns, consistent classification of adaptation expenditure, forward-looking network analysis, stronger evidence from small and medium-sized enterprises and emerging economies, and direct assessment of whether corporate adaptation increases rather than redistributes societal resilience.