No. 144: Climate Disclosure in Financial Statements

Year: 2024
Type: Working Paper


Climate exposure, a firm’s financial risks and opportunities related to climate change, is increasingly recognized as a driver of firm value. We study its reflection in financial statements. Whereas firms increasingly discuss climate exposure elsewhere (e.g., in ESG reports), investors and policymakers worry that the financial statements, the bedrock of corporate reporting, largely ignore it. To explore this emerging accounting phenomenon, we present three sets of analyses. First, EU firms – unlike U.S. firms – increasingly disclose climate impacts on key accounting items such as asset impairments and contingent liabilities. Second, these disclosures increase in firms’ climate exposure and vary with supply frictions (e.g., preparation cost) and demand forces (e.g., from enforcers). Third, in contrast to the largely voluntary, unaudited disclosures made elsewhere, climate disclosures in financial statements more strongly reflect firms’ fundamental climate exposure, in line with their role of grounding the corporate information environment in reliable ‘hard facts’.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, Goethe University Frankfurt, University of Cologne and Leibniz University Hannover who share the same research agenda.

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