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The impact of climate change on financial reporting of oil, gas, and coal companies: integrating climate change risks into financial statements

This project investigates how companies report the impact of climate change risks on their operations and future prospects in order to improve stakeholder decision making. The research provides insights that policy makes and standard setters can use to enhance disclosure and stakeholder’ protections.

Duration: October 2024 to October 2025

Partners:

The Australian Accounting Standard Board

Key people:

• Hafez Abdo
• Dr Eric Lee - The Australian Accounting Standard Board
• Dr Freeman Brobbey Owusu - Loughborough University

Research summary

Background:

Climate change and its associated regulations pose risks to companies. These risks impact how these companies operate. Oil, gas, and coal companies contribute significantly to climate change but are also highly exposed to climate change risks. Narrative climate change-related disclosures have been increasing since the Paris Agreement in 2015. However, impacts of climate change and its associated regulations seem to have not been equally considered quantitatively in companies' financial statements.

This study aims to unveil the extent to which oil, gas, and coal companies listed in the UK, Australia, Canda and South Africa incorporate climate change and its associated risks into their financial statements. Furthermore, it assesses the fitness of climate change-related disclosure requirements in fulfilling the information need of stakeholders, and reasons that hinder fossil fuel companies from disclosing climate change risks in their financial statements.