Understanding, mapping and reporting of climate-related risks among listed firms in Sweden

Abstract

ABSTRACT We study the mapping and reporting of climate-related risks among firms listed on the NasdaqOMX stock exchange in Stockholm in four goods-producing industries. Our study contains two parts: (i) a study of the firms’ external communication through their annual reports, sustainability reports and webpages, and (ii) a follow-up survey of the top management team. The survey contains quantitative questions and free text answers, which provide additional insights into the mapping and risk-handling of climate-related risks among the firms. We find that firms are likely to engage in some form of mapping and reporting of climate-related risks, but there are variations among the firms. Furthermore, the management of climate-related risks appears to be a residual issue for most firms with little active engagement from the management team or board of directors. Key policy insights Public policies and private initiatives, such as the EU’s Non-Financial Reporting Directive/Corporate Sustainability Reporting Directive (NFRD/CSRD), the EU Taxonomy for Sustainable Activities, and Task Force on Climate-related Financial Disclosure (TCFD), may redirect and accelerate investments promoting a low-carbon and climate-resilient economy. Although most firms map and report climate-related risks, the understanding of the nature of these risks, of underlying problems, and of what a climate transition implies, varies across firms and industries. The success of the EU’s NFRD/CSRD, the EU Taxonomy for Sustainable Activities, and TCFD requires an improved understanding of climate-related risks among the firms and a more proactive engagement of the management team. Policymakers must provide firms with additional guidance aimed at improving their understanding of climate-related risks and thus their capacity to manage these risks. Firms need to, individually and jointly, revise their theoretical and empirical understandings of climate-risk management and especially the role climate-related risks play in the new policy setting. The TCFD has an important role to play, but as a voluntary initiative, it is insufficient to generate change among all firms.