Using a global dataset of 6,229 firms from 48 countries (2002–2021), this study examines how CCE affects financial outcomes, particularly in high-carbon-emission firms, and explores the moderating role of TCFD participation. The results show that CCE increases a firm's default risk and reduces value, with greater vulnerability in carbon-intensive industries. Moreover, TCFD participation mitigates these adverse effects of climate change exposure on financial outcomes. These findings suggest that engaging with the TCFD framework effectively addresses climate-related challenges, reduces default risk, and increases firm value, underscoring the strategic value of transparent climate risk disclosure in strengthening financial resilience. The study employs PSM to address potential endogeneity issues, confirming the primary results robustly. Additionally, companies implementing the TCFD framework more effectively mitigate the adverse effects of CCE on financial outcomes, which is pronounced for firms in civil law countries than in common law countries. This study extends the literature by integrating stakeholder theory, the resource-based view, and signaling theory to comprehensively understand how climate risk and mitigation strategies shape financial outcomes. The findings offer critical insights into climate risk management and sustainable corporate strategy, highlighting the importance of TCFD participation and legal systems in moderating the adverse effects of environmental change threats.