Climate change disclosure and capital market dynamics: evidence from the UK Equity Market

Venturini, A. (2025) Climate change disclosure and capital market dynamics: evidence from the UK Equity Market. PhD thesis, University of Reading. doi: 10.48683/1926.00130917

Abstract/Summary

This thesis examines how investors price firm-level climate change disclosures and the role of investor preferences for such disclosures within the UK equity market. The first and second empirical chapters investigates the effect of physical climate risk disclosure and climate adaptation disclosures on firm value around natural disaster events. Using textual analysis of annual reports issued between 1996 and 2018 by UK listed firms, I demonstrate that the disclosure of material exposure to physical climate risks mitigates the negative effects of natural disasters on firm value. However, I observe that disclosing climate adaptation measures does not have any mitigating effect on firm value. Further tests show that this heterogeneous response to climate-related disclosures arises from their asymmetric effects on investor uncertainty. The third empirical chapter analyses the preferences of institutional investors who are signatories to the United Nations Principles for Re sponsible Investment (UN PRI) for climate disclosures that are financially material. Leveraging the ClimateBERT large language model to classify material climate commitments in UK firms’ annual reports, I find that UN PRI investors induce investee firms to disclose such in formation, particularly commitments related to climate transition risks rather than physical climate risks. Moreover, I show that disclosures induced by UN PRI investor engagement are relevant for capital markets, as they enhance the informational content of annual reports and are associated with higher analyst forecast accuracy. This thesis contributes to the field of climate finance by providing novel evidence from the UK equity market. Specifically, it highlights the firm-level valuation benefits of transparency regarding physical climate risks, the limitations associated with climate adaptation disclosures, and the critical role of responsible investors in promoting the disclosure of material climate commitments. The findings have significant implications for corporate disclosure practices, investor stewardship, and regulatory initiatives aimed at fostering climate-resilient financial markets.

Item Type	Thesis (PhD)
URI	https://centaur.reading.ac.uk/id/eprint/130917
Identification Number/DOI	10.48683/1926.00130917
Divisions	Henley Business School
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