Analysts’ Use of Information in TCFD Aligned Climate Change Disclosures in Their Forecasts

49 Pages Posted: 18 Jan 2023

See all articles by Dong Ding

Dong Ding

University of Wollongong

Bin Liu

University of Wollongong

Millicent Chang

University of Wollongong

Date Written: January 16, 2023

Abstract

We examine how financial analysts use the information contained in TCFD aligned climate change disclosures in their forecasts, using firm-level textual climate change disclosures. The results show that climate change disclosures are associated with reduced forecast error and dispersion. This association is more pronounced over shorter-term forecasting period and among TCFD supporting firms. Additionally, TCFD category-level disclosures under Governance, Strategy, and Risk Management specifically improve analyst earnings forecasts. Further analyses suggest that our main results remain robust after accounting for endogeneity and alternative forecast measures. Our results highlight the importance of understanding the role of climate change disclosures in capital markets.

Keywords: Climate change disclosures, TCFD recommendations, analyst forecasts

JEL Classification: M41, M48

Suggested Citation

Ding, Dong and Liu, Bin and Chang, Millicent, Analysts’ Use of Information in TCFD Aligned Climate Change Disclosures in Their Forecasts (January 16, 2023). Available at SSRN: https://ssrn.com/abstract=4324980 or http://dx.doi.org/10.2139/ssrn.4324980

Dong Ding (Contact Author)

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Bin Liu

University of Wollongong ( email )

Northfields Avenue
Wollongong, NSW 2522
Australia

Millicent Chang

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

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