Abstract:

Financial materiality is currently gaining momentum in the realm of sustainability reporting, with both private and public actors supporting its implementation. Concerns have been raised on how a financial materiality can contribute to the understanding of climate risks, where problems of vague materiality assessments still persist, across sectors and geographies. A standardization of climate data under financial perspective is scrutinized as climate-related risks need a long-term approach and an integration in valuation models that have been built on a short-lived sentiment. Nonetheless, investors themselves are stressing their interest for the correct allocation of capital, but ask for standard setting from the regulation itself. As financial institutions are currently building their own methodologies to integrate the financial effects of climate risks, this paper will explore the underlying apparatus of assessing and integrating climate-related data. This research aims at investigating the information needs of financial institutions for credible and comparable climate data that effectively reflects firms’ exposure. Consequently, the contribution has important insights for how climate risks can be understood through improved data provision and adoption by financial markets. This research responds to the growing call for transparency and consistency in climate-related financial reporting by exploring the methodologies and perspectives of the Swedish financial market. Based on the current guidelines and tools, the analysis showcases the limitations of current methodologies as well as the persisting short-terminism approach that may conflict with the long-term and systemic nature of climate-related risks.

Please choose your submission type: Full Paper

Primary Track: Financial Management

Keywords: Environmental Finance ;Financial Strategy ;Risk Management

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Mrs. Andreea Neagu