Search Results (18)

Many agreements and protocols in the global framework call on industries and businesses to respond to threats related to climate change. New terminologies such as environmental, social, and governance (ESG) scores address this issue and responsibility. This study investigates the impact of sustainability (environment (ENV), social (SOC), governance (GOV), and ESG) on the financial performance of firms in the fast-moving consumer goods industry from 2013 to 2020, the second commitment period of the Kyoto Protocol (SCKP). The study sample covers 113 firms in the North American region (the USA and Canada did not participate in SCKP). The results showed that ESG is not an influencer of financial performance, while ENV and SOC components negatively affect financial performance. On the other hand, GOV is the most significant influencer that positively impacts financial performance. Based on these findings, ESG and its components are not conducive to promoting financial performance during the SCKP period. However, fast-moving consumer goods are ahead of other sectors in terms of sustainability disclosure. Moreover, the highest positive impact of GOV is attributed to the advanced system with rules, standards, and regulations that foster the better and more efficient governance of firms from developed countries. Full article

Countries are confronting climate change using climate-related regulations that require firms and investors to disclose their green strategies and activities. Using the Meta-Analysis Structural Equation Modeling (MASEM) technique, this study evaluates the relationship between climate-related regulations and financial markets. The meta-regression analysis is conducted based on the outcomes of 52 empirical studies screened from 143 relevant articles. The results show the predictive power of the climate-related disclosure (CRD) laws and environmental regulations (ERs) on financial performance across all studies. ERs create mixed impacts on the equity market and support the debt market. Firm value is affected by ERs either negatively or positively. Methodologies and risk-related factors (market, industry, and firm risks) are important in explaining the relationships between ER/CRD and financial performance. The more developed the market, the less the impact of ERs and CRD on the equity market. Considering industry risk is recommended because different industries are exposed to changes in policies differently. The ER/CRD–firm value relationship is affected by all market, industry, and firm risks. The downside effect of mandatory CRD on the equity market suggests that policy makers, firms, and investors should be cautious in passing a new CRD regulation for transformation towards a sustainable economy. Full article

Blockchain technology has revolutionized numerous industries, including that of financial accounting. However, its potential to support environmental, social, and corporate governance (ESG) objectives remains underexplored. This paper addresses this gap by investigating how blockchain’s decentralized and tamper-resistant characteristics can enhance green financial instruments, investment strategies, and climate-related financial disclosures. By leveraging these unique features of blockchain and applying knowledge discovery from data (KDD) methods, we uncover patterns and establish rules that highlight blockchain’s role in promoting transparency, accountability, and sustainability within the financial sector. Through a comprehensive analysis of literature, case studies, and real-world examples, this paper not only presents a balanced perspective on the integration of blockchain into financial accounting but also underscores its transformative potential in advancing ESG initiatives. The use of KDD provides novel insights into the effectiveness and implementation strategies of blockchain for ESG, making this study a pioneering resource for academics, professionals, and policymakers seeking to understand and harness blockchain’s impact on ESG in financial accounting. Full article

Sustainability credentialling is the communication of environmental, social, economic, or animal-welfare-related information about a producer or product. Demand for sustainability credentials has been increasing and the aim of this study was to describe the main drivers for this kind of information in Australian red meat value chains that reach consumers across Australia and internationally, mainly in Asia, the USA, and the Middle East. The mixed methods approach included consultation with red meat processors. Desk-based research explored drivers from outside the value chain identified in the consultation. Little evidence was found that consumers are a driver of sustainability credentialling. The main drivers were in the global financial system, expressed in coordinated climate action policies by financial service providers and emerging government climate-related financial legislation. The inclusion of Scope 3 emissions extends coverage to most value chain participants. Net zero transitioning presents many risks to red meat value chains, potentially involving costly interventions and greater difficulty accessing financial services, with direct implications for production costs and asset values. Urgent action is recommended to achieve the formal recognition and use of climate metrics that differentiate the management strategies that are applicable to short-lived biogenic methane compared to CO₂ to achieve the Paris Agreement goals. Full article

This study examines the impact of corporate characteristics on climate change governance among 100 of the world’s largest companies, with 1400 observations in the fiscal year 2020. We consider variables such as company location, size, profitability, female board representation, years of reporting using Task Force on Climate-Related Financial Disclosures (TCFD) guidelines, the inclusion of UN Global Compact and Global Reporting Initiative (GRI) information, Dow Jones Sustainability Index (DJSI) membership, MSCI ESG ratings, and the presence of a climate transition plan, a sustainability executive, and a sustainability board committee. Applying a multi-theoretical framework, we employ correlation analysis and univariate and multiple linear regressions to assess the relationships. Our findings reveal positive correlations between climate governance and the presence of a climate transition plan, MSCI ratings, DJSI membership, and the existence of a sustainability executive. Additionally, companies located in developed countries exhibit significantly higher levels of climate change governance. These results hold across various scenarios, offering valuable insights for researchers, academics, business leaders, practitioners, and regulators. With the growing importance of climate change reporting, understanding the key contributing factors for effective climate governance is crucial for organizations seeking to address this critical issue. Full article

Governments worldwide have launched climate policies to mitigate greenhouse gas emissions (GHG). These policies aim to enhance businesses to be active actors in the process of decarbonisation. Therefore, the main objective of this paper is to identify the drivers of voluntary corporate decarbonisation illustrated by climate target-setting practices. In particular, this paper aims at diagnosing whether European Union (EU)-wide and country-level policies foster material corporate commitment to mitigating the carbon footprint in two countries that are exceptionally heavily dependent on fossil fuels: Poland and Hungary, which are characterised by a specific political-economic situation. This analysis focuses on policies related to the EU sustainable finance initiative that enhances companies to voluntarily reduce their GHG emissions: (1) sustainable financial sector, (2) corporate disclosure, and (3) corporate governance policy. At the country level, the national policies for state-owned enterprises (SOEs) are analysed. The empirical research is conducted based on the financial and economic data for a group of Polish and Hungarian publicly listed companies exposed to these regulations. The exposure to certain policies is approximated through selected corporate characteristics. Logistic regression analysis is applied to firm-level data gathered from Refinitive and corporate reports. The dataset covers the period 2014 to 2021, with 214 data-points. The response variable is a binary indicator of whether a company sets emission targets. The empirical research proved that state ownership, belonging to the financial sector, and performance-oriented corporate governance factors have a significantly negative impact on the probability of a company setting target emissions. On the other hand, the company’s size and leverage have a strong positive impact on the probability of setting emission targets. Also, it was confirmed that after 2020 the frequency of corporate target-setting in Poland and Hungary increased. Additionally, it was observed that Polish firms are more willing to set climate targets than Hungarian ones. Therefore, from the analysed policies, only the corporate sustainability disclosure policy proved to have a positive impact on the practices of setting climate targets in Polish and Hungarian firms. The policies related to the sustainable financial sector and to state-owned enterprises proved to have a negative impact on the probability of setting climate targets, while for the corporate governance policy, the results are mixed. In this vein, it was shown that, by a majority, policies to stimulate voluntary corporate commitment to decarbonisation are counter-effective in countries characterised by exceptional fossil fuel dependence and particular institutional features. The original value of this study stems from the applied methodology focusing on a mix of policies addressing the deep decarbonisation process in the specific country settings. The presented research contributes to an on-going debate on the drivers of voluntary corporate decarbonisation, in particular the impact that policy mixes framed under the sustainable finance agenda may have on material commitments to GHG emission reduction targets. In this context, the main findings are important for policymakers who are responsible for creating and implementing policy measures devoted to the deep decarbonisation process. It is recommended that policymakers should consider national specificities while designing policies for a Europe-wide net-zero transition and account for potential tensions arising from different goals as they may have impact on the effectiveness of the decarbonisation process. Future research may focus on the verification of the observed relationships between variables on a larger sample of the European firms to identify the key drivers of deep corporate decarbonisation. Full article

Against the backdrop of growing climate concerns, banks’ credit exposures as a financial services industry are extremely vulnerable to climate risks, and banks should make good disclosures to respond to stakeholder demands. This paper develops an evaluation system to evaluate the quality of climate information disclosure of A-share-listed banks with respect to the characteristics of the banking industry. It finds that the quality of climate information disclosure of A-share-listed banks is not high but is increasing year by year. A multiple regression model is also constructed to empirically investigate the factors influencing the quality of climate information disclosure. The results show that corporate size, dual listing and board size make a significant positive contribution to the quality of climate information disclosure of A-share-listed banks, while the shareholding ratio of institutional investors is negatively related to the quality of climate information disclosure. Full article

As sustainability becomes fundamental to companies, voluntary and mandatory disclosures or corporate sustainability practices have become a key source of information for various stakeholders, including regulatory bodies, environmental watchdogs, nonprofits and NGOs, investors, shareholders, and the public at large. Understanding sustainability practices by analyzing a large volume of disclosures poses major challenges, given that the information is mostly in the form of text. Applying machine learning and text analytic methods, we analyzed approximately 25,428 disclosure reports for the period of 2011 to 2020, extracted from the Securities and Exchange Commission (SEC) filings and made available at the Ceres website via application programming interfaces (APIs). Our study identified six industry clusters from the K-means and six main topics from the latent Dirichlet allocation (LDA) method that related to the disclosure of climate-change-related environmental concerns. Both methods produced overlapping results that further reinforce and enhance our understanding of climate-change-related disclosure at various levels, such as sector, industry, and topic. Our analysis shows that companies are concerned primarily with the topics of gas emission, carbon risk, climate change, loss and damage, renewable energy, and financial impact when disclosing climate-change-related issues to the government. The study has implications for corporate sustainability practices, the communication and dissemination of such practices to stakeholders at large and furthering our understanding of sustainability in general. Full article

The recommendations of the Task Force on Climate Change Disclosure (TCFD) represent fundamental guidelines for managing climate-change-related risks. Indeed, the TCFD outlines good practices for integrated risk management as well as aims to protect investors and stakeholders through a more transparent and complete disclosure on the subject. However, the adoption of the recommendations was slow and differentiated between countries. The study aims to analyze the determinants that have influenced the voluntary choice of companies to adopt the TCFD recommendations. Using a logistic regression on a sample of Italian public interest entities, the results show that the size of the board, the integration of ESG risks, and the size of the company are variables that influenced the managers’ decision to adopt the guidelines. Full article

Climate-related reporting has become an integral part of firms’ disclosure. In this context, firms’ greenhouse gas (GHG) emissions are of major importance to stakeholders and management. For measuring GHG emissions, a global standard has been established with the GHG Protocol. This standard contains an important accounting policy option that significantly affects firms’ reported emissions by allowing them to use different consolidation approaches: the equity share, operational control, and financial control approach. However, there is limited evidence on firms’ use of these approaches, resulting in a lack of foundation for discussing the approaches’ sufficiency to support achieving environmental sustainability. Therefore, this paper aims to close this research gap by empirically investigating the approaches’ relevance using 16,604 firm-year observations between 2009 and 2019. We demonstrate that the operational control approach is used by most firms and that its predominance substantially increased during the last decade. However, the predominant use of the operational control approach is not fully compatible with societal and political sustainability goals as expressed in recent sustainability regulations. Therefore, policy makers need to critically assess whether current GHG reporting supports achieving their goals. Furthermore, we develop a research agenda to encourage future researchers to contribute to improvements in GHG reporting. Full article

Conflicts of interest (COI) are an integral part of human society, including their influence on greenhouse gas (GHG) emissions and climate change. Individuals or entities often have multiple interests ranging from financial benefits to reducing climate change-related risks, where choosing one interest may negatively impact other interests and societal welfare. These types of COI require specific management strategies. This study examines COI from land-use decisions as an intersection of different perspectives on land use (e.g., land conservation versus land development), which can have various consequences regarding GHG emissions. This study uses the state of New Jersey (NJ) in the United States of America (USA) as a case study to demonstrate COI related to soil-based GHG emissions from land conversions between 2001 and 2016 which caused $722.2M (where M = million = 10⁶) worth of “realized” social costs of carbon dioxide (SC-CO₂) emissions. These emissions are currently not accounted for in NJ’s total carbon footprint (CF), which can negatively impact the state’s ability to reach its carbon reduction goals. The state of NJ Statutes Annotated 26:2C-37 (2007): Global Warming Response Act (GWRA) (updated in 2019) set a statewide goal of reducing GHG emissions to 80 percent below 2006 levels by 2050. Remote sensing and soil data analysis allow temporal and quantitative assessment of the contribution of land cover conversions to NJ’s CF by soil carbon type, soil type, land cover type, and administrative units (state, counties), which helps document past, and estimate future related GHG emissions using a land cover change scenario to calculate the amount of GHG emissions if an area of land was to be developed. Decisions related to future land conversions involve potential COI within and outside state administrative structures, which could be managed by a conflict-of-interest policy. The site and time-specific disclosures of GHG emissions from land conversions can help governments manage these COI to mitigate climate change impacts and costs by assigning financial responsibility for specific CF contributions. Projected sea-level rise will impact 16 out of 21 NJ’s counties and it will likely reach coastal areas with densely populated urban areas throughout NJ. Low proportion of available public land limits opportunities for relocation. Increased climate-change-related damages in NJ and elsewhere will increase the number of climate litigation cases to alleviate costs associated with climate change. This litigation will further highlight the importance and intensity of different COI. Full article

The G20-led TNFD taskforce or TNFD is under development and should be ready in September 2023. With one year to go before its official release, the study of the beta versions of the 0.2 framework is crucial to know the strategy of the taskforce regarding metrics and sectors with high natural risks. Its big sister, the Taskforce on Climate-related Financial Disclosure or TCFD, had defined the health sector as a non-key in terms of climate change and carbon risks, but the TNFD decided that it was a priority in terms of nature-related risks and co-dependencies. This research therefore focuses on the innovations of the TNFD and its impact on future disclosures in the sector. The goal being to predict if the TNFD will lead to more disclosures and therefore better risk management from the health firms. To complete this research, the analysis of the sector’s risks and dependencies on nature-related issues and biodiversity loss was essential. To do so, a policy analysis on the framework of the TNFD was conducted, as well as a literature review on nature related risks and opportunities for the health sector. The Health Sector-Wide Approach (SWAp) was analysed to highlight the Task Force’s focus on the health sector. Finally, a due diligence of the TNFD’s stakeholders and partners was carried out to ascertain the interest and participation of health sector actors in the TNFD. Results have shown that Nature risks were important for the sector and that the TNFD was giving more importance to the sector in terms of priority. On the contrary, the health sector does not show an improved interest in this new taskforce. There is a need for more research in the implementation of Nature-financial metrics for disclosures. Full article

The health sector in Australia and the ASX100 is lagging far behind in the implementation of carbon management and climate risk analysis. This case study highlights the low quantity and quality of the sector compared to its market weight. The analysis of CDP disclosures for Australian healthcare companies shows this delay and a general lack of interest in the Task Force on Climate-Related Financial Disclosures’ (TCFD) recommendations. Yet, the physical and transitory risks for these companies do exist. The reasons for this inaction represent a knowledge gap in the literature, but several hypotheses are formulated, such as the lack of pressure from public authorities. At the level of the ten largest healthcare companies in the world, this failure to act is not systemic, so the scope of analysis must be broadened to see a pattern emerging. Full article

There seems to be no agreed taxonomy for climate-related risks. The information in firms’ climate risk disclosures represents a new resource for identifying the priorities and strategies of Australian companies’ management of climate risk. This research surveys 839 companies listed on the Australian Stock Exchange for the presence of climate risk disclosures, identifying 201 disclosures on climate risk. The types of climate risks and the risk management strategies were extracted and evaluated using machine learning. The analysis revealed that Australian firms are focused on acute physical climate risks, followed by market and regulatory risks. The predominant management strategy for these risks was to use a risk reduction approach, rather than avoiding or transferring risk. The analysis showed that key Australian industry sectors, such as materials, banking, insurance, and energy are focusing on different mixtures of risk types, but they are all primarily managing risks through risk-reduction strategies. An underlying driver of climate risk disclosure was composed of the financial implications of climate risk, particularly with respect to acute physical risks. The research showed that emission reductions represent a primary consideration for Australian firms in their disclosures identifying how they are responding to climate risk. Further research using machine learning to evaluate climate risk disclosure should focus on analysing entire climate risk reports for key topics and trends over time. Full article

While the development of globally accepted sustainability reporting standards initiated by the IFRS Foundation has largely engaged stakeholders in developed economies, the stakes for developing economies could be compromised without an explicit consideration of their sustainability issues within this standard-setting framework. This paper examines the need to develop global sustainability reporting standards based on the principle of double materiality to warrant that both the target towards carbon net-zero by 2050 under the Paris Agreement and the subsequent promise to accelerate under COP26 are achieved with efficacy. Adopting a multiple-case study approach, this paper reveals the limitations of existing sustainability reporting in the absence of double materiality in a developing economy. Specifically, the analyses reveal limited climate-related disclosures among selected cases in Ghana. Available disclosures connote increasing GHG emissions over the period under consideration. This study also shows weak disclosure comparability across the companies following similar reporting standards. Overall, it argues that enforcement of double materiality to embrace sustainability issues impacting both developed and developing economies is necessary for an effective transformation towards a low-carbon global economy. It contributes to the existing body of knowledge by elucidating double materiality as a pertinent interdisciplinary concept and devising a holistic framework for the emerging global sustainability reporting system to underscore governance accountability for external costs to the environment. Global sustainability reporting standards with a myopic focus on conventional financial matters in the absence of double materiality remain a disclosure system with implausible impact on climate change. Full article