We study the effects of weather shocks on firms’ productivity and financial performance in the Colombian manufacturing sector. Using plant-level data from the Annual Manufacturing Survey for 2013–2022 and high-resolution satellite-based climate information from CHIRPS and Copernicus, we estimate firm productivity using a structural production function and assess how extreme weather events affect both productivity and financial outcomes. Our results show that weather shocks—particularly excess rainfall and drought—significantly reduce firm productivity. Since productivity is a key determinant of financial performance, these shocks indirectly deteriorate firms’ return on assets, investment per worker, and value added per worker. In addition, we find evidence of direct effects of weather shocks on financial performance, especially during periods of high precipitation. Sector-level analysis reveals heterogeneous responses, with some industries partially offsetting productivity losses through increased demand following extreme weather events. Overall, our findings highlight that firms’ productivity and financial performance are vulnerable to climatic variability. This suggests that firms’ resilience to weather shocks is closely linked to their productive capacity and sectoral characteristics, and that Colombia’s environmental and climate policies—particularly those aimed at promoting adaptation, energy resilience, and productivity-enhancing investments—could play a critical role in strengthening resilience across manufacturing industries in the face of increasing climate risks.
