The Determinants and Informativeness of ‘Voluntary’ Climate and Sustainability‐related Financial Disclosures in Australia

John L. Campbell, Anita Foerster, Mukesh Garg and Luisa A. Unda

Abacus, 2025, vol. 61, issue 4, 961-1022

Abstract: Until recently, there has been no mandatory standard governing climate‐related disclosures in the financial statements of Australian firms, raising concerns about the quality and decision‐usefulness of such disclosures. This study employs machine learning‐based textual analysis to examine the nature and extent of climate‐related disclosures in firms’ financial statements and accompanying notes. We report several key findings. First, most firms do not disclose any climate‐related information in their financial statements or accompanying notes, and, when they do, the disclosures tend to be limited. Second, firms that provide disclosures are typically larger, have greater growth opportunities, are audited by high‐quality auditors, and are less likely to operate in industries most exposed to climate risk. Third, we find that climate‐related financial disclosures are associated with accelerated depreciation and amortization, increased audit fees, and higher firm valuations. Taken together, these results suggest that ‘voluntary’ climate‐related disclosures in Australian firms’ financial statements and accompanying notes are informative.

Date: 2025
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