Climate risk disclosures: Why more information isn’t always better for investors by Professor Simone Varotto
Professor Simone Varotto analysed the financial reports of UK-listed companies from 1996-2018 and found a surprising pattern in how markets respond to different types of climate disclosures after natural disasters strike.
The article reflects a study that revealed a counterintuitive truth about corporate climate disclosures: more disclosure doesn’t necessarily translate to better market performance during climate-related emergencies.
Companies that simply disclosed their exposure to climate risks saw smaller stock price declines following disasters compared to their non-disclosing peers. Yet, firms that went further by detailing their climate adaptation strategies experienced stock price drops just as severe as companies that made no disclosures at all.
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