Navigating uncharted territory: exploring the drivers of climate-related financial disclosures in South Africa

Abstract

Purpose – Climate-related risks and opportunities (CROs) have a significant impact on companies’ financial prospects. Furthermore, climate-related financial disclosures influence investor decision-making depending on how companies assess and provide a fair presentation of material CROs. However, there is a notable dearth of studies that explores the drivers of climate-related financial disclosures, specifically within the context of emerging markets. To promote the widespread disclosure of climate-related financial risks, this paper aims to explore the driving factors of climate-related financial disclosures in South Africa. Design/methodology/approach – This paper adopts a qualitative exploratory approach by interviewing experts with a cumulative experience of preparing 16 climate-related financial disclosure reports. The interview data from the report preparers with 19 years average in the financial services industry were analysed using the qualitative thematic process to identify the drivers of climate-related financial disclosures. Findings – The thematic analysis of the semi-structured interview responses from experienced report preparers identifies institutional investors, activist shareholders, the board, commitment to disclosures, policy and regulation, competitors, working groups and clients as the drivers of climate-related financial disclosures in South Africa. Practical implications – The empirical findings highlight the important role of organisational and external forces in enhancing the disclosure of climate-related financial risks and opportunities in South Africa. Social implications – Based on the critical role of financial institutions in financing sustainable development and the just transition, understanding the motivations for the disclosure of climate-related financial risks becomes vital for enhancing the flow of financial resources towards sustainable business practices. Originality/value – As far as the authors are concerned, this paper presents one of the earliest evidence on the drivers of climate-related financial disclosures in emerging markets.