Financial effects of carbon risk and carbon disclosure: A review

Article

Wang, Qingxia (Jenny). 2023. "Financial effects of carbon risk and carbon disclosure: A review." Accounting and Finance. 63, pp. 4175-4219. https://doi.org/10.1111/acfi.13090
Article Title

Financial effects of carbon risk and carbon disclosure: A review

ERA Journal ID19059
Article CategoryArticle
AuthorsWang, Qingxia (Jenny)
Journal TitleAccounting and Finance
Journal Citation63, pp. 4175-4219
Year2023
PublisherJohn Wiley & Sons
Place of PublicationAustralia
ISSN0810-5391
1467-629X
Digital Object Identifier (DOI)https://doi.org/10.1111/acfi.13090
Web Address (URL)https://onlinelibrary.wiley.com/doi/full/10.1111/acfi.13090
Abstract

Carbon risk has generated significant adverse impacts on firms, investors and other stakeholders. Carbon disclosure may provide market participants with information to effectively manage risks and explore opportunities. We conduct a critical review of the growing literature in these fields and seek to examine the financial effects of carbon risk and carbon disclosure. A total of 78 papers, published in influential accounting, finance, business, economics and management journals between 2011 and 2021, are reviewed. We categorise the financial effects into four groups: financial performance, valuation relevance, cost of capital and risk profiles (measures). The proxies for carbon risk and carbon disclosure are summarised. This review demonstrates inconclusive relationships between carbon risk (carbon disclosure) and firms' financial measures. These inconclusive findings may result from different carbon risk (carbon disclosure) measures, financial performance measures, sample geographies, sizes and periods, and model specifications. This review further identifies and highlights future research opportunities in relevant areas and calls for more research work to understand the influence of climate change on firms' value and activities.

Keywordscarbon disclosure; carbon risk; carbon emission; cost of capital; financial performance; risk profile; valuation relevance
Contains Sensitive ContentDoes not contain sensitive content
ANZSRC Field of Research 20203599. Other commerce, management, tourism and services
4101. Climate change impacts and adaptation
Byline AffiliationsUniversity of Queensland
Centre for Applied Climate Sciences
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