Climate-Related Disclosures in Financial Statements - A Study on the Connection with Front-End Disclosures and the Role of Institutional Investors

Abstract

This study examines the impact of climate-related disclosures in the front-end of the annual report and institutional ownership on climate disclosures in the financial statements. Using a sample of Swedish companies listed on Nasdaq Stockholm across the large-, mid- and small-cap segments for the years 2023 and 2024, we find that climate-related disclosures in the front-end have a positive association with the probability of providing climate information in the financial statements. Specifically, firms that have a larger degree of climate-related disclosures in the front-end of their annual reports are more likely to integrate this information into their financial statements. We also find partial evidence that institutional ownership is negatively associated with climate disclosures in the financial statements. While prior research often positions institutional investors as drivers of improved climate disclosures, our findings provide some evidence that firms with a higher proportion of institutional ownership may exhibit lower levels of climate disclosure and transparency. The findings of this study contribute to the limited academic literature on the connection between climate disclosures in the front- and back-end of annual reports, as well as the role of institutional owners in influencing climate-related disclosures in the financial statements. This study also provides practical implications for regulators and policymakers by offering timely insights into the integration of climate disclosures during a period of significant and ongoing regulatory change.