Determinants of climate change disclosures in the Turkish banking industry

Abstract

Purpose

The purpose of this paper is to investigate the extent of voluntary climate change disclosures in the Turkish banking industry and explore the factors explaining the extent of such disclosures.

Design/methodology/approach

The research sample is based upon 24 banks that had been continuously operating in Turkey over the seven-year period from 2010 to 2016. The study uses a disclosure index to investigate the extent of voluntary climate change-related disclosures made in their annual and sustainability reports by banks. The study also investigates factors impacting the extent of disclosures by using multiple regression and fractional regression analysis.

Findings

The findings of the research reveal that while the number of banks providing voluntary information on their climate change-related practices substantially increased from 2010 to 2016, there remains a significant number of banks that have not incorporated climate change-related issues into their lending policies or corporate strategies. Further, with regard to the regression analysis, the study documents the significant and positive impacts of bank size, profitability, bank age and listing status upon the extent of the climate change disclosures, in line with political cost and legitimacy theory.

Practical implications

The banking sector crucially impacts climate change indirectly, since banks provide financial backing to companies operating in environmentally sensitive industries. This paper presents empirical evidence of the factors impacting the extent of climate change disclosures by these banks, which might then be referred to by regulatory bodies when developing policies to promote environmentally responsible business practices within the banking industry.

Social implications

Several parties, which include governments, companies, financial institutions and non-governmental organizations (NGOs) must work together to fight climate change. In this sense, the NGOs and green activists have a crucial role in raising public awareness about climate change, which might then inspire financial institutions to incorporate climate change-related issues into their policies, operations and strategies.

Originality/value

The study extends the prior literature in two ways. This study has concentrated on environmental reporting practices in the banking sector which have been investigated in very few prior studies. Since prior research has focused on developed countries, this paper adds to the current literature by examining the environmental disclosure practices of commercial banks operating in Turkey, which is a rapidly developing country.

Citation

Kılıç, M. and Kuzey, C. (2019), "Determinants of climate change disclosures in the Turkish banking industry", International Journal of Bank Marketing, Vol. 37 No. 3, pp. 901-926. https://doi.org/10.1108/IJBM-08-2018-0206