Who gains favor with green investors amidst climate risk?

Abstract

Purpose

This study aims to investigate the impact of climate risk disclosure by listed companies on the entry of green investors. It seeks to understand how proactive climate risk disclosure can attract green investment and the underlying mechanisms that facilitate this process.

Design/methodology/approach

Textual analysis is employed to assess the extent of climate risk disclosure in annual reports. The research constructs indicators for green investor entry and applies regression analysis to examine the relationship between climate risk disclosure and green investment, considering various mediating variables such as positive online news coverage, ESG scores, and corporate reputation.

Findings

Green investors are more likely to invest in companies with higher levels of climate risk disclosure. This relationship is robust across different types of firms, with non-state-owned, non-high-tech, large-scale firms, and those in the Eastern region showing a stronger attraction to green investors. Climate risk disclosure promotes green investment through the “signal transmission” mechanism, enhancing corporate reputation and ESG performance.

Originality/value

This paper extends the traditional theory of external incentives for corporate green development to include autonomous incentives through active climate risk disclosure. It provides new insights into the theory of corporate sustainable development and offers practical recommendations for enhancing corporate green development pathways. The study’s comprehensive approach and use of extensive data contribute valuable knowledge to the field of green investment and corporate sustainability.

Citation

Feng, L. and Huang, D. (2024), "Who gains favor with green investors amidst climate risk?", China Finance Review International, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CFRI-05-2024-0260