Carbon Information Disclosure Research Articles

Carbon Information Disclosure, Marketization, and Cost of Equity Financing.

Using listed enterprises in China’s heavy pollution industry from 2009 to 2013, this study tests the relationship between marketization degree, carbon information disclosure, and the cost of equity financing. The results show that, regardless of marketization degree, the overall level of carbon information disclosure of listed enterprises in China’s heavy pollution industry is low. The content of carbon information disclosure is mainly non-financial carbon information, and the financial carbon information disclosure is very low. The cost of equity financing is different in areas with different marketization degrees, specifically speaking, the cost of equity financing is lower in regions with a high marketization degree than that of a low marketization degree. Carbon information disclosure, non-financial carbon information disclosure, and financial carbon information disclosure are negatively correlated with the cost of equity financing. The marketization degree has strengthened the negative correlation between carbon information disclosure, non-financial carbon information disclosure, financial carbon information disclosure, and the cost of equity financing, respectively.

Carbon Disclosure, Financial Transparency, and Agency Cost: Evidence from Chinese Manufacturing Listed Companies

ABSTRACTGiven the constraints on carbon emissions due to their impact on global warming, carbon disclosure has become an important way to deliver signals to the market. We examine the benefits associated with carbon disclosure from the standpoint of corporate social responsibility (CSR) for China’s manufacturing industries from 2010 to 2014. We divide corporations into heavily polluting and non-heavily polluting groups in order to control the industry factor. Based on the Principal-Agent Theory, we empirically test the relationship between carbon disclosure and financial transparency, and we evaluate the effect of carbon disclosure on agency costs and operations. Our results highlight that carbon disclosure is negatively associated with agency costs. However, we do not find enough evidence to prove what role financial transparency plays in the relationship between carbon disclosure and agency cost. Therefore, the influence of financial transparency as a mechanism is not yet clear. This study provides a way to look at the intentions of firms that disclose carbon information, and it also enhances the literature on carbon disclosure and agency costs in China based on Chinese data.

Chinese consumer responses to carbon labeling: evidence from experimental auctions

With the growing anxiety over global warming, some groups have advocated the mandatory carbon labeling of products, whereas other groups have opposed such labeling. How consumers respond to carbon labels is a key question with important implications for both policy-makers and managers. Using a random nth-price auction experiment together with a questionnaire, we systematically examined the extent to which Chinese consumers care about environmental impacts and how their willingness to pay (WTP) is influenced by carbon labels. We have determined that WTP significantly increases for products with added carbon labels and decreases when the carbon emissions of a product increase. This response to carbon information disclosure is influenced by factors such as the gender and awareness of environmental pollution by the consumer. This study offers valuable insights to policy-makers and managers for carbon labeling promotion and product positioning.

The relation between voluntary carbon disclosure and environmental performance

PurposeThe purpose of this study is to investigate the effect of environmental performance on the environmental disclosure level.Design/methodology/approachCarbon disclosure leadership index score is considered as a proxy of carbon disclosure level, while greenhouse gas (GHG) emissions as a proxy of environmental performance. In addition, six control variables are used: return on assets, financial leverage, company’s size, CEO duality, board size and percentage of independent directors on board. The sample comprises 102 companies from a population of Standard & Poor’s 500 (S&P 500) companies over a five-year period, 2009-2013.FindingsResults revealed that higher pollution levels in terms of GHG emissions affect negatively the dissemination of carbon disclosure information, suggesting a positive relationship between environmental performance and environmental disclosure level. In addition, companies with good environmental performance in relation to their average environmental performance disseminate more carbon information in their disclosures. Thus, the carbon disclosure level is indicative of environmental performance consistent with the voluntary disclosure theory.Practical implicationsThe managerial behavior regarding the relation of environmental disclosure and environmental performance is explained. In addition, the findings should be of use to those investors interested in finding carbon emission information so that they assess investments and evaluate their current portfolios in terms of environmental sustainability.Originality/valueIt is intended to ascertain the reliability level of carbon disclosure regarding carbon emission information by incorporating the carbon disclosure leadership index score and GHG emissions.

Women in the boardroom and their impact on climate change related disclosure

PurposeThis paper aims to investigate the relationship between gender diversity and the Carbon Disclosure Project (CDP) score/index. Specifically, the study describes extant research on theoretical perspectives, and the impact of women on corporate boards (WOBs) on carbon emission issues in the global perspective.Design/methodology/approachThis study uses the carbon disclosure scores of the CDP from 2011 to 2013 (inclusive). A total observation for the three-year periods is 1,175 companies. However, based on data availability for the model, the sample size totals 331 companies in 33 countries with firms in 12 geographical locations. The authors used a model which is estimated using the fixed-effects estimator.FindingsThe outcomes of the study reveal that there is a positive relationship between gender diversity (WOB) and carbon disclosure information. In addition to establishing a relationship between CDP score and other control variables, this study also found a relationship with Board size, asset size, energy consumption and Tobin’s Q, which is common in the existing literature.Research limitations/implicationsThe limitations of the study mostly revolve around samples and the time period. To further test the generalizability and cross-sectional validity of the outcomes, it is suggested that the proposed framework be tested in more socially responsible firms.Practical implicationsThere are increasing pressures for WOBs from diverse stakeholders, such as the European Commission, national governments, politicians, employer lobby groups, shareholders, Fortune and Financial Times Stock Exchange (FTSE) rankings and best places for women to work lists. The study offers insights to policy makers implementing gender quota legislation.Originality/valueThe study has important implications for putting into practice good corporate governance and, in particular, gender diversity. The outcomes of the analyses advocate that companies that included women directors and had a smaller board size may expect to achieve a higher level of carbon emission performance and to voluntarily disclose the level of carbon information assessment requested by the CDP.

Media reporting, carbon information disclosure, and the cost of equity financing: evidence from China.

By using Shanghai and Shenzhen A-share listed companies in heavy polluting industry as research object from 2009 to 2014, this paper examines the relationship between media reporting, carbon information disclosure, and the cost of equity financing. The results show that media reporting can improve the quality of carbon information disclosure, and carbon information disclosure level is negatively associated with the cost of equity financing. This study also finds that financial carbon information disclosure and non-financial carbon information disclosure have significant negative relationship with the cost of equity financing respectively. Moreover, this paper shows that media reporting can strengthen the relationship between carbon information disclosure and the cost of equity financing.

Market Motivations for Voluntary Carbon Disclosure in Real Estate Industry

Climate change mitigation in developing economies is a balancing act, between economic development and environmental sustainability. The need for market friendly determinants for low carbon economy, without compromising economic development is of essence. The aim of the study is to determine market friendly factors, which motivates voluntary carbon information disclosure, in the real estate industry. The study modeled economic factor with three variables and financial market factor with three variables against voluntary carbon information disclosure in the real estate industry. Structural equation modeling was used for the modeling and content analysis was used to collect data on the level of voluntary carbon information disclosure, from 2013 annual reports of 126 real estate sector companies listed in the Kuala Lumpur Stock Exchange (KLSE). The model achieved a good fit, and was acceptable prediction. The results show that financial market factor has a significant predictive influence on voluntary carbon disclosure. The application of the result is that financial market factor is has a significantly positive influence on companies’ willingness to make voluntary carbon disclosure in the real estate industry. The result may be limited to the real estate industry that is highly leveraged on syndicated fund.

Environmental Legitimacy, Green Innovation, and Corporate Carbon Disclosure: Evidence from CDP China 100

Firms worldwide are increasingly required to disclose (and make efforts to reduce) their carbon emissions due to the environmental damage associated with climate change. Because there has been no previous literature focusing on the determinants of corporate carbon disclosure integrating environmental legitimacy and green innovation, the present study attempted to develop an original framework to fill the research gap. This study explored the influence of environmental legitimacy (an external informal mechanism) on corporate carbon disclosure, and investigated the role of green innovation (an internal formal mechanism) as a mediator. With the samples of Carbon Disclosure Project (CDP) in China from 2008 to 2012, the results demonstrate that environmental legitimacy significantly negatively influences the likelihood of corporate carbon disclosure, and that green process innovation mediates the relationship, while green product innovation has no significant mediating effect. It means that environmental legitimacy not only directly affects the likelihood of corporate carbon disclosure, but also indirectly affects it via green process innovation. Hence, companies must increase both informal and formal mechanisms, i.e., external environmental legitimacy and internal green process innovation, to engage in carbon information disclosure and ensure sustainability.

Voluntary carbon disclosure by Spanish companies: an empirical analysis

Purpose– This paper aims to identify and analyze the factors contributing to the decision of organizations to disclose carbon information, as well as its transparency level.Design/methodology/approach– The Tobit regression is used to analyze the results of the Spanish companies that were invited in 2012 to respond to the Carbon Disclosure Project (CDP) questionnaire. The results of this study are interpreted according to the legitimacy and stakeholder theories.Findings– The results show that the probability of carbon disclosure and its transparency level are explained by the influence of pressures from society, markets, shareholders and international interactions. In the Spanish case, the factors that have shown a stronger influence are the size of the company, financial risk, their listing in the IBEX35 and FT500 indexes and the ownership concentration.Originality/value– One of the main contributions of this study to the previous literature lies in the used research method. Thus, while previous studies analyze the factors that can determine whether companies disclose carbon information, this paper has also considered the quantification and differentiation of the effect of these factors on the probability of supplying this information, as well as obtaining a higher score in the CDP questionnaire, representing a higher transparency level in the information provided. For this objective, the usefulness of the Tobit regression is to be highlighted.

A Review of Economic Factors Influencing Voluntary Carbon Disclosure in the Property Sector of Developing Economies

Global warming has consequences on the environment and economy; this led to the establishment of United Nation Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. These two agreements were to reduce greenhouse gases (GHG) emissions which are responsible for climate change and global warming. Developing countries under the protocol are not obligated to reduce or disclosure GHG emission, so their participation in the protocol is on voluntary mitigation bases. This study intends to examine economic factors that influence voluntary carbon disclosure in the property sub-sector of developing countries based on annual report of listed property companies in Malaysia. Signaling theory addresses the problem of information asymmetry in the society. Disclosure is an effective tool to overcome information imbalance among different market participants. The study hypothesizes that the economic factors that influence voluntary carbon information disclosure in developing countries are: [1] the company's size; this is because a large-sized company have more resources to cover the cost of reducing pollution. [2] The company's gearing status; where there is no sufficient information disclosure in a highly geared company will result to an increased agency cost. [3] Profitability; profits grants companies a pool of resources for mitigation activities and environmental reporting. Also, carbon disclosure acts as a means for achieving public confidence and legitimacy. [4] Liquidity: Companies that are highly liquid will disclosure more information to distinguish themselves from other companies that are less liquidity. This is correlated to environmental disclosure. [5] Financial slack affects companies’ ability to participate in green technology projects that enable a reduction in emission.

Carbon information disclosure of enterprises and their value creation through market liquidity and cost of equity capital

Purpose: Drawing on asymmetric information and stakeholder theories, this paper investigates two mechanisms, namely market liquidity and cost of equity capital, by which the carbon information disclosure of enterprises can benefit their value creation. Design/methodology/approach: In this research, web crawler technology is employed to study the link between carbon information disclosure and enterprises value creation?and the carbon information data are provided by all companies listed in Chinese A-share market Findings: The results show that carbon information disclosure have significant positive influence on enterprise value creation, which is embodied in the relationship between carbon information disclosure quantity, depth and enterprise value creation, and market liquidity and cost of equity capital play partially mediating role in it, while the influence of carbon information disclosure quality and concentration on enterprise value creation are not significant in statistics. Research limitations/implications: This paper explains the influence path and mechanism between carbon information disclosure and enterprise value creation deeply, answers the question of whether carbon information disclosure affects enterprise value creation or not in China. Practical implications: This paper finds that carbon information disclosure contributes positively to enterprise value creation suggests that managers can reap more financial benefits by disclosing more carbon information and investing carbon emissions management. So, managers in the enterprises should strengthen the management of carbon information disclosure behavior. Originality/value: The paper gives a different perspective on the influence of carbon information disclosure on enterprise value creation, and suggests a new direction to understand carbon information disclosure behavior.

Exploring the Relationship between Carbon Performance, Carbon Reporting and Firm Performance: A Conceptual Paper

In recent years, there has been an increased interest in carbon information disclosure. This research aims to examine carbon reporting practices of Malaysian companies. Further analysis will be conducted to examine the influence of internal organizational factors on the carbon reporting practices. The relationship between carbon performance, carbon reporting and firm performance will be investigated. This paper also explores the moderating effect of the corporate governance quality on the relationship between carbon reporting practices and firm performance. The findings from this study have a significant contribution to carbon reporting literature, Malaysian companies, government and accounting regulation body.

Corporate Voluntary Carbon Information Disclosure: Evidence from China's Listed Companies

AbstractThis article seeks to answer two questions: (i) what factors drive firms to decide whether or not to disclose the information related to their greenhouse gas emissions (also called carbon information)? (ii) what forces lead firms to disclose more carbon information? Using data hand‐collected from the annual Corporate Social Responsibility reports of China's listed companies from 2008 to 2012, we find the following: (i) firms that operate in sectors of high‐emission industries are more likely to make carbon information disclosure (CID hereafter); (ii) the more companies within one industry that make CID, the more likely it is that a company in that industry will make CID; (iii) companies having a higher sales rank within an industry are more likely to make CID.

Market Responses to Firms' Voluntary Climate Change Information Disclosure and Carbon Communication

AbstractDespite the importance of the Carbon Disclosure Project (CDP), the question of how firms' voluntary carbon disclosure influences capital markets and shareholder value remains unanswered. Using the event study methodology with a sample of firms from the CDP Korea 2008 and 2009, this paper investigates market responses to firms' voluntary carbon information disclosure. The results suggest that the market is likely to respond negatively to firms' carbon disclosure, implying that investors tend to perceive carbon disclosure as bad news and thus are concerned about potential costs facing firms for addressing global warming. In addition, the study examines the moderating effect of frequent carbon communication on the relationship between carbon disclosure and shareholder value. The results suggest that a firm can mitigate negative market shocks from its carbon disclosure by releasing its carbon news periodically through the media in advance of its carbon disclosure. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.

Comparison of propensity for carbon disclosure between developing and developed countries

PurposeThe purpose of this paper is to investigate differences in voluntary carbon disclosure between developing and developed countries and the role of resource availability in explaining these differences.Design/methodology/approachThe authors used a sample consisting of 2,045 large firms from 15 countries and representing divergent industries that released Carbon Disclosure Project (CDP) company reports in 2009. Profitability, leverage and growth were used as proxies for the degree of resource availability and the firm's participation in the CDP was used as a proxy for carbon disclosure propensity.FindingsConsistent with the authors' predictions, the empirical results show that the carbon disclosure propensity is correlated in the right direction with resource availability proxies; this relationship is stronger in developing nations, suggesting that the shortage of resources is one reason for the lack of commitment to carbon mitigation and disclosure in these countries. The results are robust when disclosure motivation proxies are controlled for. In addition, it is shown that firms tend to disclose carbon information if their shares are owned by CDP signatories, because it allows them to be viewed as more powerful stakeholders. This finding, which enhances the validity of stakeholder theory, previously has not been documented in the literature.Research limitations/implicationsThe findings are relevant to the world's largest organisations, as determined by their market capitalisation. Thus, caution should be exercised to generalise the paper's inferences to small or medium‐sized organisations.Practical implicationsThe evidence suggests that resource shortages may constrain a firm management's carbon decisions. As the regulatory environment becomes more stringent, firms, particularly those in developing countries need to take a more proactive strategy to tackle global warming challenges and balance the need to achieve financial goals and prevent carbon pollution with their limited resources.Originality/valueAlthough prior studies typically considered external pressures that motivated voluntary environmental disclosure, the paper's results offer extra insight and suggest that resource restriction provides a complementary explanation – largely ignored in the existing literature – for variation in the carbon‐disclosure propensity of firms.

Corporate Incentives to Disclose Carbon Information: Evidence from the CDP Global 500 Report

AbstractWe investigate how the Global 500 companies respond to the challenge of climate change with regard to their carbon disclosure strategies. This paper is motivated by a growing body of research that examines the role of large companies in carbon disclosure responsibility and practices. We consider the impact of social, financial market, economic, regulatory, and institutional factors on the motivation to voluntarily participate in the 2009 Carbon Disclosure Project. We find that economic pressure is significantly associated with the decision. That is, companies facing direct economic consequence are more likely to disclose. Companies in greenhouse gas (GHG) intensive sectors show the same tendency. In addition, big companies have a higher propensity for disclosing, suggesting that social pressure plays an important role. We also provide possible explanations as to why a large proportion of our sample firms refuse to disclose. Furthermore, our results suggest that the proxies for information needs of investors are not associated with a higher propensity to disclose the amount of their emission footprints. In sum, it appears that the major driving force for climate change disclosure comes from the general public and government rather than from the other major stakeholders such as shareholders and debtholders. Our results are robust after controlling for other influences.

Performance of Carbon Emission Management, Carbon Information Disclosure and Firm Value Creation: A Theoretical Research Framework

The companies’ performance of carbon emission management will have effects on the firms value via the carbon information disclosure. It is better to based on the global capital market when addressing the relationship among the performance of carbon emission reduction，the quality of carbon information disclosure and the firm value. The key topics of research should be focused on the motivation and efficiency of carbon information disclosure, the quality index of carbon information disclosure, the functioning mechanism of carbon emission management performance and carbon information disclosure quality on firm value, and the preparation of carbon disclosure report.

Transparency of Corporate Carbon Disclosure: International Evidence

Purpose – Increased awareness regarding environmental issues has encouraged corporations to disclose carbon related information. The study concerns carbon disclosure in the typical form of the Carbon Disclosure Project (CDP). The CDP constitutes an international voluntary code developed by a non-government organization to encourage consideration of carbon emission issues in decision making. Such a code can flexibly bridge the gap between individual companies’ sustainability initiatives and mandatory, legal regulation. We examine the effectiveness of the code and the determinants of the transparency of the carbon disclosure. The study contributes to the understanding of management (dis)incentives to be (un)accountable for their carbon impact on global warming.Design/methodology/approach – The paper is based on the academic literature on motivations for sustainability and environmental reporting, together with an analysis of the carbon disclosures made by the Global 500 firms. We assess the degree of transparency using the Carbon Disclosure Transparency Score (CDTS) adopted from the CDP reports. The CDTS focuses on carbon risks and opportunities, carbon footprints, carbon reduction activities, governance and verification of carbon information. We consider the influence of information needs of stakeholders and institutional effects on carbon transparency.Findings – We find the CDP has attracted an overwhelming majority of the Global 500 to disclose carbon information. However, we observe a great disparity in carbon transparency between firms in different sectors and institutions. Our results show 74% of 243 firms in our sample achieved 50% or higher on the CDTS (sample average is 60%), so their reports are reasonably transparent, and the remaining were un-transparent (or opaque). We interpret the lack of transparency as evidence of a lack of managerial incentive to be accountable. In addition, we find firm size, leverage, industry membership, emission trading scheme (hereafter ETS), stringency of environmental regulation, as predicted, are significantly associated with carbon transparency. Research limitations/implications –The results imply that stakeholder theory and institutional theory provide different but complementary explanations for the development of carbon disclosure practices. Future research is needed to gauge how the CDP code impacts front-line decision making. It could be useful to have further standardization of CDP reporting formats and contents, including more details about project-level implementation. Practical implications – The CDP in its current incarnation is a system which produces assessable reports of carbon activities, and it encourages the development of web-based forms of corporate accountability. From the organization’s perspective, the study provides immediate feedback and has the potential to improve practice through the identification of forces for change not considered in prior theorizing. Based on the findings, we make some suggestions for improvement of carbon disclosure. Some firms have already been involved in voluntary external assurance, which added creditability and value to the reports. Use of voluntary external assurance should be encouraged.Originality/value – Our study attempts to propose a research instrument to measure carbon transparency (obscurity) as a multi-item construct. Our findings help to illuminate the effectiveness of a voluntary code in the social construction of how stakeholder theory and institutional theory are to be interpreted and implemented. In addition, our international cross-sectional evidence for determinants of carbon transparency contrasts with findings in previous research focusing on general environmental issues, and research in national settings.

Corporate Incentives to Disclose Carbon Information: Evidence from Global 500

We investigate how the Global 500 companies respond to the challenge of climate change with regard to carbon disclosure strategy. This paper is motivated by a growing body of research that examines the role of large companies in carbon disclosure responsibility and practices. Based on the previous research, we consider the impact of economic, regulatory, social and financial market factors on motivation of Global 500 to voluntarily disclose carbon information in Carbon Disclosure Project in 2009. We find that the economic factor is significantly associated with the voluntary carbon disclosure decision. That is, companies that face direct economic consequence are more likely to disclose carbon related information. Companies in carbon intensive sectors show the same tendency. In addition, large companies have more propensity to disclose carbon information, suggesting social or political pressure plays an important role in such a decision. In addition, we provide evidence of why a large proportion of our sample Global 500 firms refuse to disclose carbon information. Our results suggest the information needs of investors for carbon footprints do not appear relevant to the carbon disclosure decision. In sum, the tendency of Global 500 to disclose carbon information is likely explained by economic and social pressure, and the major driving force for climate change disclosure comes from the general public and government, rather than other major stakeholders such as shareholders and debtholders. Our results are robust after controlling other influences.