Does Disclosing Carbon Emission Impact The Largest Firms in The World?
Environmental sustainability and the impact of greenhouse gas emissions have become a critical issue for policy makers globally. It is top of the agenda of the upcoming COP conference in Glasgow next November which is responsible for monitoring and reviewing the implementation of the United Nation’s ‘Framework Convention’ on climate change. In the field of accounting and finance scholars recognize the practical importance of understanding the interaction between business operations and financial performance, and the need for sustainable finance.
Environmental sustainability and the impact of greenhouse gas emissions have become a critical issue for policy makers globally. It is top of the agenda of the upcoming COP conference in Glasgow next November which is responsible for monitoring and reviewing the implementation of the United Nation’s ‘Framework Convention’ on climate change. In the field of accounting and finance scholars recognize the practical importance of understanding the interaction between business operations and financial performance, and the need for sustainable finance. In a recent research paper published in a leading finance journal, Assistant Professor of Accounting Md Abubakar Siddique from the College of Business, investigates the relationship between carbon disclosure, carbon performance and financial performance for a sample of world’s largest 500 firms. The results indicate that if businesses increase disclosure about their climate change activities, their financial performance would be negatively affected in short term but would be positively affected in long term. Results of this study also indicate that, businesses should try to improve their carbon performance as it will also positively affect their financial performance in long term. The research team concludes that their findings have significant implications for investors as some firms use carbon disclosure as part of impression management, and their results could help regulators to monitor carbon disclosure and carbon performance and assist investors with investment decisions. Professor Siddique said “Investors are now much more conscious of the environmental impact of industrial carbon emissions, and the need for large global firms to implement net-zero carbon emissions strategies if we are to reverse climate change. Insights from this paper are timely and important for all stakeholders at a critical time when corporate social responsibility is top of everyone’s agenda for change”.
Reference: Siddique, M. A., Akhtaruzzaman, M., Rashid, A., and Hammami, H., (2021). Carbon disclosure, carbon performance and financial performance: International evidence, International Review of Financial Analysis.
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