Abstract
This paper aims to observe the impact of climate change disclosure (CCD) towards corporate financial performance (CFP) proxied by returns on assets (ROA), return on sales (ROS), and sales growth. Linear and non-linear approaches are employed for this research. Recommendation from Task Force on Climate-Related Financial Disclosures (TCFD) are applied for content analysis to obtain CCD scores. The target population in this study is 45 best performing companies (LQ45) listed on the Indonesia Stock Exchange (IDX) that disclosed sustainability report from 2014 to 2018. The number of observations is 72 year-companies. The findings show that CCD in large companies decreases ROS and improves ROA, yet in general, the improvement occurs in the long term for ROA and sales growth after a certain level is met (U-curve). In general, providing climate-related information will eventually pay. Financial improvement of the companies has increased despite of low quality of CCD and an indication of positive customer reaction to CCD is noticeable.
Highlights
Climate change affects businesses, mitigating and adapting to climate change needs to be streamlined into business process
This paper aims to observe the impact of climate change disclosure (CCD) towards corporate financial performance (CFP) proxied by returns on assets (ROA), return on sales (ROS), and sales growth
Total asset (TA) retrieved from annual reports is used as a proxy for SIZE
Summary
Mitigating and adapting to climate change needs to be streamlined into business process. It impacts corporate finance, affecting various kinds of assets, sales, and costs (Stechemesser et al, 2015). One adaptation example is disclosing climate-related information through sustainability report (SR) (Wittneben & Kiyar, 2009). SR is a practice to report an organization’s impacts and contributions on economic, social, and environmental aspects towards the goal of sustainable development (GRI, 2018). Global Reporting Initiative (GRI) standards encourages organizations to disclose emissionsrelated information. Investors view climate risk reporting to be as crucial as traditional reporting (Ilhan, et al 2020)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
