What are the Drivers of Corporates’ climate transparency? Evidence from the S&P 1200 Index

This paper investigates the determinants of corporates’ voluntary climate-related risk disclosures throughout the world. Relying on the Carbon Disclosure Project (CDP) database and the recommendations of the Task Force on Climate-related financial Disclosures (TCFD) supported by the Financial Stability Board, we carried out our empirical research in two stages related to two levels of transparency: first, we focused on the decision of whether to respond the CDP questionnaire, and second, we considered firms’ level of compliance with the TCFD recommendations. We applied a sequential logit model to analyze a sample of companies from around the world included in the S&P 1200 index for 2020.

Our results identify different drivers (even with opposite signs). First, the likelihood of responding to the CDP survey depends primarily on the level of regulatory constraints imposed by a company’s home country. Second, a firm’s level of compliance with the TCFD recommendations is mainly explained by its level of CO2 emissions, the presence of a CSR external audit firm and the country’s regulatory constraints. Such empirical evidence based on a global study highlights the need for standardization of climate-risk disclosures.