This paper investigates how natural resources can affect firms and supply chains by constraining capacity in critical infrastructure. Combining granular data on firms’ maritime shipping and exogenous variation in the capacity of a major trade route caused by drought, I analyze the effects of disruption on the operations and profitability of U.S. firms. A one-standard deviation increase in water scarcity at a choke point decreases revenues and operating income by approximately 3%. Operating expenses increase with constraints, with the incidence of costs determined by firms' market power. Using data on vessel movement and transportation costs, I show that these effects are likely driven by shipping delays and increases in freight rates. Investors do not appear to fully anticipate the effects, since earnings surprises become more negative even when information was publicly available. Since many economies rely on waterways increasingly constrained by drought, these findings underscore that exacerbating natural capacity constraints can pose significant risks to the economy.

The carbon premium, the financing-cost spread between carbon-intensive and low-carbon firms, is confounded by oil shocks, especially during commodity-stress periods. Event studies and time-series evidence show that oil shocks drive upstream extractive firms’ financing costs in equity and bonds via growth options and risk exposures, with limited pass-through to other brown firms; oil beta captures only part of this effect. Re-examining the Paris Agreement, we separate upstream and downstream brown firms and characterize oil and climate news. The Paris effect aligns with oil shocks, not climate-policy news or anticipation; with oil exposure controlled, we find no carbon-transition-risk repricing around Paris.

We show how socially responsible investment (SRI) affects multinational firms’ environmental footprint using satellite vegetation health around 52,806 facilities in 124

countries combined with institutional ownership data over 2006-2020. We identify these

effects by exploiting two asset-manager-level designs and within-firm changes in SRI

ownership. Higher SRI ownership improves vegetation health, but these improvements

are concentrated around facilities in OECD countries. Around non-OECD facilities of

the same firms, vegetation health deteriorates. This asymmetry is strongest among investors reporting advanced stewardship practices. Our results suggest that investor

stewardship and public regulation are complements in shaping firms’ environmental behavior.