Sustainable governance and climate-change disclosure in European banking: the role of the corporate social responsibility committee

Abstract

Purpose The purposes of this paper are: firstly, to assess the disclosure related to climate change (CC) by major European banks to understand if the banks have grasped the most substantive aspects of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and secondly, to evaluate the contribution of a non-traditional committee (i.e. corporate social responsibility (CSR) committee) to TCFD-compliant disclosure. Design/methodology/approach Using content analysis and ordinary least squares regressions on a sample of 101 European banks, this study sought to investigate completeness, tone and forward-looking orientation of CC disclosure and explore the relationships between CSR committee and previous disclosure aspects. Findings This study shows that European banks have been able to reach an intermediate level of adequacy of compliance in terms of completeness of information but forward-looking orientation seems to be the aspect that needs the most improvement. The existence of a CSR committee dedicated to sustainability issues seems to constitute the difference between the banks in terms of disclosure. The results highlight vulnerabilities in disclosure and board characteristics relevant for improving CC disclosure. Practical implications Firms interested in strengthening stakeholder engagement and capturing strategic opportunities involved in CC should be encouraged to establish a CSR committee and appoint female directors in financial companies. This paper should be of interest to policymakers, governance bodies and boards of directors considering the initiative of corporate sustainable governance complementary to Directive 2014/95/EU on non-financial reporting by the European Commission. Originality/value To the best of the authors’ knowledge, no prior study has investigated the relationship between the CSR committee and the application of the TCFD’s recommendations in the European banking industry.

Corporate climate reporting of European banks: Are these institutions compliant with climate issues?

“…category. In contrast to our analysis,Cosma et al (2022) saw the greatest weaknesses in climate reporting in the area of Governance.They concluded that while banks have started to assess the business and risk impacts of climate change, they have not yet completed the upstream and downstream processes on associated roles and responsibilities. However, our further analysis shows that significant improvements in reporting quality were visible in the area of Governance, particularly from 2019 to 2020.…”

“…This should include information on the existence of incentive systems for members of the administrative, management, and supervisory bodies that are linked to sustainability aspects. These incentive systems are therefore not necessarily limited to pure compensation systems.UnlikeCosma et al (2022), we see the largest reporting gaps in the core category of Strategy. In this context, we observed that although the majority of banks have already identified climate-related risks and opportunities, a majority of them do not differentiate between short-, medium-, or long-term climate-related impacts.…”

“…We found the highest reporting quality in the Risk Management category, with the greatest improvements observed in the Governance category. Therefore, it can be assumed that the awareness of climate-related risks and opportunities continues to grow on the board and at management level, which could also lead to positive synergy effects with regard to the reporting quality of the other categories (Cosma et al, 2022).…”

“…However, our further analysis shows that significant improvements in reporting quality were visible in the area of Governance, particularly from 2019 to 2020. This development may have high potential in terms of robust climate reporting Cosma et al (2022). stated that the existence of CSR committees at banks promotes greater transparency in climate reporting and supports stakeholders' need for information.…”

Decarbonization and the Benefits of Tackling Climate Change

“…Moreover, researchers should play an important role among non-state actors needed to resist this global problem. The prestige of the research provided by the scientific community will subsequently be reflected in the approval of public polices [8] and the improvement in voluntary social and business actions [9] that will enable net zero emissions to be achieved by 2050.…”