Why do Institutional Investors Request Climate Related Disclosures?

Cohen, Shira; Kadach, Igor; Ormazábal, Gaizka

doi:10.2139/ssrn.4138869

Cited by 4 publications

(10 citation statements)

References 23 publications

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“…Unexpectedly, the relationship between carbon performance, as measured in terms of Scopes 2 and 3 and carbon disclosure, is positive, suggesting that large innovative firms are making more sustainability efforts to reduce their carbon footprints, if compared to noninnovative firms. Our findings are coherent with stakeholder theory arguments (Abubakar Siddique et al, 2021;Bui et al, 2020;Cohen et al, 2023), suggesting that innovative firms are more engaged in responding to environmental stakeholders' needs. Given the importance of sustainability challenges, our evidence suggests that innovative firms, which have invested substantial resources in research and development, including environmental research, are showing a higher level of carbon-responsible behavior by enhancing their carbon performance (Scopes 1, 2, 3 and D Emissions' intensity).…”

Section: Regression Resultssupporting

confidence: 90%

“…They found that firms show a higher ability to invest in those new eco-responsible projects that target efficient carbon emission management. Although Cohen et al (2023) focused on the relationship between carbon emissions, in terms of Scope 1 only (they did not consider Scopes 2 and 3 in their study), carbon disclosure and institutional investors. They found that institutional ownership is exerting pressure in 51 countries to enhance carbon disclosure and lower carbon footprint.…”

Section: Relevance Of Carbon Performance On Carbon Disclosurementioning

confidence: 99%

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The relevance of carbon performance and board characteristics on carbon disclosure

Mardini,

Elleuch Lahyani

2023

SEF

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Purpose The purpose of this study is to examine the impact of carbon performance on carbon disclosure among nonfinancial French-listed firms, while also considering the corporate board’s characteristics as a secondary objective. Design/methodology/approach This study uses a sample of Société des Bourses Françaises 120 Index (SBF-120) French-listed firms to investigate the effect of multiple carbon performance proxies on carbon disclosure based on random effects models for the period 2010–2021. Generalized method of moments regressions are used to encounter endogeneity problems. Findings Drawing on stakeholder theory, this paper finds that greater carbon performance leads to greater carbon disclosure. Given the growing societal awareness about climate-change issues, carbon-responsible firms are likely to disseminate relevant carbon-related information through disclosures to respond to the information demands of a varied stakeholder group. Coherent with signaling theory, large firms that undertake carbon-reduction initiatives tend to disclose more information about their enhanced carbon performance to equity participants to distinguish themselves and highlight their decarbonization efforts. Originality/value This study offers significant insights given that SBF-120 firms are involved in climate-change activities as a response to the growing institutional and societal pressure to perform better and disclose reliable environmental information in their sustainability reports.

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Section: Regression Resultssupporting

confidence: 90%

Section: Relevance Of Carbon Performance On Carbon Disclosurementioning

confidence: 99%

The relevance of carbon performance and board characteristics on carbon disclosure

Mardini,

Elleuch Lahyani

2023

SEF

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“…Cohen et al. (2023) examine institutional investors’ demand for climate‐related information and find that ownership by CDP signatories is positively related to CDP disclosure, which is associated with subsequent lower carbon emissions. Additionally, corporate carbon transparency (proxied by CDP) is enhanced when CEOs’ compensation contracts are better aligned with stakeholder interests (Luo et al., 2021).…”

Section: Background and Hypotheses Developmentmentioning

confidence: 99%

Too dark to see: Does board governance moderate the relationship between carbon emissions and analyst forecast errors?

Hsiao,

Liao,

2023

J Corp Accounting Finance

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This study aims to demonstrate that carbon emissions may increase analyst forecast errors because poor environmental performance obscures prospects for business operations. We further examine whether strong board governance moderates such a relationship. Using a sample of S&P 500 firms from the Carbon Disclosure Project (CDP), we employ Heckman's two‐stage model to examine our research questions. We find a positive association between carbon intensity and forecast errors, but strong board governance, captured by board independence, board diligence, and committee size, may mitigate this positive relationship. However, the effect is amplified for firms engaged in controversial governance practices such as CEO duality and long CEO tenure. Our study provides insight for managers by raising concerns due to high levels of carbon emissions and demonstrating that different governance characteristics may alleviate the adverse effect of carbon emissions on forecast errors.

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“…Considering the significant impact of climate transition risks on global economic and social sustainability, it is particularly important to analyze the relationship between climate transition risks and corporate ESG performance. The increasing demand from investors and regulators for corporate disclosure on climate change is forcing companies to clearly report on their performance and strategies for climate transition (Cohen et al, 2023). It is not only about adapting to external requirements but also about identifying and exploiting strategic opportunities in a carbon-constrained environment.…”

Section: Introduction 11 Backgroundmentioning

confidence: 99%

The Green Chain: A Carbon Neutral Path from Climate Risk to Environmental, Social and Governance Performance

Zhang,

Mohd Nasir,

Nor-Ahmad

2024

PaperASIA

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Global climate change is increasingly recognized as a critical factor influencing economic performance, thereby making the Environmental, Social, and Governance (ESG) performance of businesses a vital indicator of sustainability. In the context of China's "dual-carbon" objective, this study examines the relationship between climate transition risk and the ESG performance of listed Chinese companies. Utilizing text analysis techniques, this research quantifies the Management Discussion and Analysis (MD&A) sections of annual reports from 2014 to 2019 to extract information on climate transition risks. A multiple regression analysis is then applied to assess the impact of these risks on companies' ESG performance. The findings indicate that climate transition risk has a measurable effect on the ESG performance of enterprises, suggesting its role as an incentive for achieving carbon neutrality. Specifically, the analysis shows that climate transition risk is associated with improvements in certain aspects of ESG performance, including environmental stewardship, social responsibility, and governance quality. Additionally, the study reveals that non-state-owned enterprises, those with diversified business strategies, decentralized management structures, and audits conducted by Big 4 firms, tend to exhibit better ESG performance in the face of climate transition risks. These results demonstrate the nuanced impact of climate transition risk on ESG performance, particularly within the framework of China's carbon reduction goals, and highlight the importance of firm characteristics in moderating this relationship. This evidence provides a foundation for stakeholders, including enterprises, policymakers, and investors, to consider climate transition risks in their efforts to enhance ESG performance.

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Why do Institutional Investors Request Climate Related Disclosures?

Cited by 4 publications

References 23 publications

The relevance of carbon performance and board characteristics on carbon disclosure

The relevance of carbon performance and board characteristics on carbon disclosure

Too dark to see: Does board governance moderate the relationship between carbon emissions and analyst forecast errors?

The Green Chain: A Carbon Neutral Path from Climate Risk to Environmental, Social and Governance Performance

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