Does Governance Affect The TCFD Reporting?An Empirical Analysis in The Financial Sector

Promoting more sustainable corporate governance and fostering more transparent disclosure on climate change are two current European-planned actions to support the integration of sustainability into corporate decision-making and improve the ability of stakeholders to adequately assess the opportunities and the risks related to the climate for companies. In light of the leadership role assigned by the European Commission to the financial sector for promoting sustainability and mitigating climate risk and the paucity of studies on the relationship between corporate governance and the disclosure of climate change related risks by financial institutions, this study has two aims. The first is to assess the disclosure related to climate change by major European banks to understand if the banks have grasped the most substantive aspects of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. The second aim is to evaluate the contribution of governance to TCFDcompliant disclosure. By using content analysis and OLS regressions on a sample of 101 european banks, our paper shows that banks have been able to reach an intermediate level of adequacy of compliance in terms of completeness of information but forward-looking orientation seems to be the aspect that is in need of the most improvement. The existence of a committee dedicated to sustainability issues seems to constitute the difference between the banks in terms of disclosure, regarding all aspects analysed. The paper should be of interest to policymakers because it provides insight into disclosure vulnerabilities and therefore indicates what to monitor to achieve public policy objectives. Furthermore, the findings can help governance bodies and boards of directors to function more effectively and establish virtuous organizational arrangements for sustainable governance