The Value Relevance of Corporate Sustainability Disclosures: An Analysis of a Dataset from One Large Asset Owner

55 Pages Posted: 13 May 2017

See all articles by George Serafeim

George Serafeim

Harvard Business School

Jody Grewal

Joseph L. Rotman School of Management - University of Toronto

Date Written: May 11, 2017


Corporate environmental and social reporting lacks the comparability across companies that is a characteristic of financial information. To address this weakness, Norges Bank Investment Management (NBIM) created analytical frameworks to measure the quality and scope of reporting relating to three focus areas: climate change, water and children’s rights. By translating information published by a global set of companies into standardized data, NBIM has constructed a dataset that can be used for analyzing and comparing companies across time and within sectors.

The purpose of this project is to understand the value relevance of NBIM’s dataset. First, we model the determinants of the disclosure scores and climate change performance score. Consistent with prior literature, we find that firms that are larger, higher growth, less closely held and with higher analyst coverage tend to disclose more. We find that the climate change performance score is less a function of observable firm characteristics and is more idiosyncratic. This highlights the different dynamics of measures that capture actual performance, versus metrics that capture disclosures of efforts.

Next, we take the ‘residual’ scores – the part of the scores that is uncorrelated with observable firm characteristics, industry and country membership – and test for associations with future financial performance. Across all of our models, the residual disclosure score is not robustly correlated with any metric of future financial performance. However, we find that the residual component of the climate change performance score is significantly related to future financial performance. We find even stronger associations for the subset of firms that have above median exposure to climate change risks.

We perform supplementary analysis to understand the motivation behind these disclosures. We find that some firms choose to disclose more because they are currently facing more problems, as measured by the level of negative media attention that the firm receives on the focal issue. We also find that firms disclosing more in the past received more negative media attention on that focal issue in the future. These results hold after controlling for factors, such as firm size, that influence both media attention and disclosure levels. This suggests that higher disclosure around an issue is not necessarily indicative of better current or future performance on the issue but in some cases, it is a signal of future bad news. Conversely, we find a negative relation between the climate change performance score and the current level of negative media attention, suggesting that this performance measure indeed captures meaningful efforts to manage climate-related risks.

Keywords: sustainability, nonfinancial data, information, value relevance

JEL Classification: M4, G14

Suggested Citation

Serafeim, George and Grewal, Jyothika, The Value Relevance of Corporate Sustainability Disclosures: An Analysis of a Dataset from One Large Asset Owner (May 11, 2017). Available at SSRN: or

George Serafeim (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States


Jyothika Grewal

Joseph L. Rotman School of Management - University of Toronto ( email )

105 St. George Street
Toronto, Ontario M5J 2Z6
6172060366 (Phone)

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