Mandatory climate disclosures: impacts on energy and agriculture markets

Abstract

Purpose

With the rise of mandating climate-related disclosures (CRD), this paper aims to investigate how energy and agriculture markets are exposed to climate disclosure risk.

Design/methodology/approach

Using the multivariable simultaneous quantile regression and data from 1 January 2017 to 29 February 2024, the authors examine daily and monthly responses of energy and agriculture markets to climate disclosure risk, energy risk, market sentiment, geopolitical risk and economic policy risk. The sample covers the global market, Australia, Canada, European Union (EU), Hong Kong, Japan, New Zealand, Singapore, the UK and the USA.

Findings

The results show that climate disclosure risk creates both positive and negative shocks in the energy and agriculture markets, and the impacts are asymmetric across quantiles in different economies. The higher the climate disclosure risk, the greater impact of crude oil future on the energy sector in North America (Canada and the USA) and Europe (EU and the UK), but no greater effects in Asia Pacific (Australia, New Zealand and Singapore). The agriculture sector can hedge against economic policy and geopolitical risks, but it is highly exposed to climate disclosure and energy risks.

Originality/value

This study timely contributes to the modest literature on the asymmetric effects of climate disclosure risk on the energy and agriculture markets at the global and national levels. The findings offer practical implications for policymakers and investment practitioners in understanding financial effects of mandating CRD to diversify risks depending upon market conditions and policy uncertainty.

Citation

Ho, L. and Renwick, A. (2024), "Mandatory climate disclosures: impacts on energy and agriculture markets", Journal of Financial Economic Policy, Vol. 16 No. 5, pp. 690-732. https://doi.org/10.1108/JFEP-04-2024-0096