Corporate climate change disclosure practices and regulation: The influence of institutional investors

Purpose – This chapter reviews the influence that institutional investors have on corporate climate change disclosures and related reporting regimes.

Approach – We overview recent research undertaken by the authors that provides evidence of the influence of institutional investors on voluntary reporting of climate change information in annual and sustainability reports. In addition, this chapter considers the influence of institutional investors on climate change disclosure regulation and the use of climate change information by investors.

Findings – The material presented in this chapter indicates that institutional investor coalitions have been internationally influential in determining the extent and content of climate change disclosures of large corporations. The CDP annual questionnaire has been particularly influential. The influence of other initiatives such as development of the CDSB reporting framework is not yet clear. Further, the ability of institutional investor coalitions to influence the regulation of climate change disclosure is uncertain, since most national governments have not yet headed requests for greater regulation.

Research implications – Several avenues for future research are identified including a consideration of the trade-offs between investor information demands, costs of compliance and a desire for concise reporting; investor decision making processes as well as the impediments to use of the information currently available; and the validity of the perception that increased disclosure requirements assists with driving emissions reductions and ensuring adequate consideration of climate change risks.

Value – The material presented in this chapter is expected to be useful for informing the continuing debate around the regulation of and/or provision of guidance to companies about the disclosure of climate change related information to investors and other stakeholders.