Opportunity or obstacle? Climate risk disclosure and corporate ESG performance

Environmental, Social, and Governance (ESG) represents an evolution and enrichment of green and responsible investment concepts, serving as a critical international benchmark for assessing corporate sustainability performance. We measure corporate climate risk disclosure using textual analysis and examine its impact on corporate ESG performance using a two-way fixed effects model. Based on unbalanced panel data of listed companies in China from 2010 to 2019, this paper cautiously draws the following conclusions. (1) Climate risk disclosure significantly enhances corporate ESG performance, particularly corporate environmental performance. This conclusion remains robust after conducting placebo tests, excluding environmental policies, and substituting different samples. (2) Climate risk disclosure can influence corporate ESG performance by attracting green investors and promoting green innovation. (3) The presence of an executive environmental background notably enhances the impact of climate risk disclosure on a corporation's ESG performance. (4) The influence of climate risk disclosure on firms' ESG performance is greater in firms without female executives. (5) Interestingly, firms' bargaining power boosts the effect of climate risk disclosure on ESG performance. This study can guide enterprises to improve ESG performance and effectively cope with climate risk disclosure.