Climate information disclosure, systemic risk and corporate green transformation

This paper examines the role of climate disclosure in promoting corporate green transformation from 2007 to 2022 among Chinese listed firms. We identify two distinct channels of systemic risk: firm-level exposure and industry-level spillovers. The latter is quantified by the transmission of return volatility from industrial equities to green bond yields, estimated using TVP-VAR and QVAR models. Our findings reveal that: (1) Climate disclosure significantly enhances firms' green transformation. However, firm-level disclosures in annual reports increase systemic risk exposure, which attenuates this effect. (2) Return volatility in industrial sectors generates systemic risk spillovers to green bond markets, weakening financing support for firms' green transition. These effects are short-lived during crises (e.g., COVID-19 and the 2022 energy crisis) but more persistent otherwise, and are amplified under extreme market conditions. (3) The effect of climate disclosure on firms’ green transformation strengthens over time and is more pronounced among state-owned enterprises, firms with higher levels of new quality productive forces, and those facing weaker competitive pressure. The results underscore the importance of coordinating disclosure policies with financial stability considerations, ensuring the effective functioning of climate disclosure in supporting the low-carbon transition.