Enhancing Financial Transparency to Mitigate Climate Change: Toward a Climate Risks and Opportunities Reporting Index

Climate change is introducing more risks and uncertainties into the economy and the financial system, but information failures limit the understanding of its financial impact on companies. To create the necessary conditions for transparency regarding these risks, the Financial Stability Board (FSB) has set up an international working group, the Task Force on Climate-related Financial Disclosures (TCFD), with the aim of enhancing climate-related corporate disclosures. In this paper, we build a novel composite index to assess firms’ compliance with the TCFD recommendations: the Climate Risks and Opportunities Reporting Index (CRORI). We also perform an empirical analysis of French CAC 40 companies over the period 2015–2018 to i) test the robustness of the calculation of the CRORI and ii) provide an initial assessment of the level of compliance of companies with the recommendations of the TCFD. Our results reveal a trend toward improved voluntary disclosure of climate-related information, particularly in the case of CO2\documentclass[12pt]{minimal} \usepackage{amsmath} \usepackage{wasysym} \usepackage{amsfonts} \usepackage{amssymb} \usepackage{amsbsy} \usepackage{mathrsfs} \usepackage{upgreek} \setlength{\oddsidemargin}{-69pt} \begin{document}$$_2$$\end{document}-intensive companies.