Climate change risks and opportunities: do sustainable business practices matter?

This study examines how sustainable business practices (SBPs) influence the disclosure of climate change risks and opportunities (CCROs) by firms. It also explores how market value and climate sensitivity affect this relationship. Using data from S&amp;P 500 firms between 2011 and 2023, collected from the Bloomberg database, the analysis applies a fixed-effects conditional logistic regression model, with results validated through a generalized estimating equation model. Firms are further analyzed based on their market value and sector sensitivity. The findings show that SBPs significantly increase the likelihood of CCRO disclosure. This is more significant in high-value firms compared to lower-value firms. The positive impact of SBPs holds across both climate-sensitive and less-sensitive sectors. This research adds to the theoretical and empirical understanding of climate disclosures and supports the positive revisionist hypothesis that SBPs enhance corporate transparency and environmental responsibility. The study also offers key policy implications, highlighting the need for mandatory CCRO and Environmental Social and Governance (ESG) reporting to promote sustainable and accountable business practices. <b>Key policy insights:</b>Firms should disclose both climate risks and opportunities to meet stakeholder expectations.Mandating the CCROs in firms’ reports can promote transparency and align corporate objectives with global climate goals.Regulators should standardize disclosures, while policymakers should encourage CSR or sustainability committees to foster innovation, strengthen climate governance, and promote sustainable business practices. Firms should disclose both climate risks and opportunities to meet stakeholder expectations. Mandating the CCROs in firms’ reports can promote transparency and align corporate objectives with global climate goals. Regulators should standardize disclosures, while policymakers should encourage CSR or sustainability committees to foster innovation, strengthen climate governance, and promote sustainable business practices.