Climate Risk Disclosure and Institutional Investors

77 Pages Posted: 19 Aug 2019 Last revised: 12 Oct 2021

See all articles by Emirhan Ilhan

Emirhan Ilhan

Frankfurt School of Finance & Management

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Laura T. Starks

University of Texas at Austin - Department of Finance

Date Written: September 29, 2021

Abstract

Employing disclosure theory, we develop hypotheses regarding the preferences of institutional investors with respect to firms’ climate risk disclosures. Through a survey and empirical tests, we test these hypotheses and provide systematic evidence suggesting that institutional investors value and demand climate risk disclosures, that climate-specific disclosure costs and benefits affect these demands, and that influence and selection effects explain the equilibrium relations between institutional ownership and disclosure. We establish evidence on the influence and selection effects of the climate risk disclosures by examining the French Article 173, the investor coalition Climate Action 100+, and the UK mandatory carbon disclosure regulation.

Keywords: Climate risks, disclosure, non-financial reporting, institutional investors

JEL Classification: G11, G3, Q54

Suggested Citation

Ilhan, Emirhan and Krueger, Philipp and Sautner, Zacharias and Starks, Laura T., Climate Risk Disclosure and Institutional Investors (September 29, 2021). Swiss Finance Institute Research Paper No. 19-66, European Corporate Governance Institute – Finance Working Paper No. 661/2020, Available at SSRN: https://ssrn.com/abstract=3437178 or http://dx.doi.org/10.2139/ssrn.3437178

Emirhan Ilhan

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

HOME PAGE: http://emirhanilhan.github.io

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute ( email )

Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Geneva - Geneva School of Economics and Management ( email )

Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

Zacharias Sautner (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

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