WORLD CITIES SUMMIT 2022

Governance Externalities of Climate-related Disclosures: A Closer Examination of Sustainability Accounting and Reporting

This study finds that local plants decrease their emissions after another firm with plants in the same county initiates climate-related disclosures.

Overview

This study examines whether there are governance externalities to climate-related disclosures by geographic peers. It finds that local plants reduce their carbon emissions when a local peer begins to provide climate-related disclosures. This study argues that when firms initiate climate-related disclosures, it attracts the attention of local residents and climate activists, who will then exert pressure on other local plants to reduce their carbon emissions.

Features and Specifications

Using plant-level emissions data and a generalised difference-indifferences research design, local plants decrease their emissions after another firm with plants in the same county initiates climate-related disclosures. This effect is stronger for plants in counties with higher income and higher education levels and for plants of firms with higher risk exposure to climate issues and lower transient institutional ownership.

Potential Applications

Regulators and standard setters around the world are considering mandating climate-related disclosure so the results of this study have implications about the scope of the pending requirements.

Lead Researcher: Assoc Prof Holly Yang (SMU School of Accountancy)

Access the full study here .

This study was featured at SMU’s booth at the World Cities Summit 2022 exhibition.