Climate change financial disclosure and firm performance: empirical evidence from Indian energy sector based on TCFD recommendations

Abstract

Purpose The paper aims to examine the climate change-related disclosure patterns of listed Indian firms and its impact on firm performance. Specifically, it strives to analyse the conformance of the selected firms with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board of G20 nations. Design/methodology/approach The study conducts content analysis of the annual reports and/or sustainability reports of 22 selected firms from the energy sector for the period spanning 2018–2019 and 2019–2020 based on the four-fold recommendations of TCFD, namely, governance, strategy, risk management and target and metrics, to compute the overall and respective climate-change disclosure scores. Further, a panel data regression model is used to appraise the impact of such disclosure on the performance of the firms. Findings The findings of the study indicate that the disclosure level of Indian firms in the energy sector is moderate. The regression results establish a positive relation between climate change-related financial disclosure and firm performance indicating that firms can witness improved financial performance by disclosing more information on climate change. Originality/value This is the first study in the Indian context to evaluate the climate change-related disclosure practices of the selected firms based on the TCFD’s recommendations and to trace its association with the performance of the firms. The results of the study shall hence be of relevance for the policymakers and diverse stakeholders.

The impact of environmental disclosure and the quality of financial disclosure and IT adoption on firm performance: Does corporate governance ensure sustainability?

“…On the other hand, the study unveiled the positive effects of ED on a firm's performance which ROA and ROE measures. Our study findings are in line with those of the existing literature (Maji and Kalita, 2022).…”

Climate risk disclosures and global sustainability initiatives: A conceptual analysis and agenda for future research

“…The adoption of the TCFD framework may also vary across different or not TCFD reporting may vary between emerging and developed markets (Maji & Kalita, 2022).…”

“…The results of both methods suggested a very poor level of adoption and disclosure quality aligned with the TCFD's recommendations in 100 Malaysian listed firms in the construction sector. A slightly different method (a binary method) was developed by Maji and Kalita (2022), who used an overall score based on a 3-point scale for the seven principles. A firm receives a value of 2 if the disclosure is relevant to each of the principles, and 1 otherwise.…”

“…The importance of the TCFD framework is more prevalent for publicly listed firms in the global North. Using a sample of 22 firms in the energy sector, Maji and Kalita (2022) also found that the degree of information disclosure is moderate. Nonetheless, these studies have demonstrated that following the TCFD's recommendations is feasible for firms in energy‐intensive areas if they are interested in doing so.…”

“…Since the TCFD provided the first disclosure framework that closely considers how climate-related risks and opportunities materially affect a firm(TCFD, 2021b), the effects of adopting the TCFD framework on a firm's operation and performance are investigated in the third strand. At the time of writing, one study byMaji and Kalita (2022) examined the impact of climate change-related disclosure following the TCFD framework on firms' performance in India. Their finding documented a positive relationship between these factors in the energy sector.…”