While financial literacy has been recently a focus for researchers, empirical evidence on the impact of financial literacy on firms’ climate investment behavior is scarce. This paper offers substantial innovation by employing a unique and granular dataset of over 9000 firms located in Romania, combining several reliable data sources, to fill the significant gap in the literature. We address the inconsistencies in the literature on evaluating financial literacy, by employing an international reference methodology, respectively the OECD’s framework. We find that firm characteristics such as size and age significantly influence the probability of directing a higher share of the total investments for climate change related actions, showing that smaller and younger firms tend to allocate less resources to this end. Moreover, profitability, ownership of fixed assets and labor intensity pose a significant influence on the firms’ climate investment. More importantly, we provide evidence that financial literacy positively and significantly impacts climate investments. On one hand, the probability of being in the lowest category of climate investments (0–5% of total investments) significantly decreases for a financial literate firm. On the other hand, the probability to allocate more than 15% of the total investments towards climate actions doubles for a financial literate firm compared to a firm with no financial literacy. The study provides valuable insights for both policymakers and businesses that by intensifying training and addressing the gaps in financial knowledge and practices can enhance their resilience to climate change, create green jobs, promote sustainable economic growth, and reduce the environmental risks for future generations.