Determinants of climate change disclosures in the Turkish banking industry

Abstract

Purpose The purpose of this paper is to investigate the extent of voluntary climate change disclosures in the Turkish banking industry and explore the factors explaining the extent of such disclosures. Design/methodology/approach The research sample is based upon 24 banks that had been continuously operating in Turkey over the seven-year period from 2010 to 2016. The study uses a disclosure index to investigate the extent of voluntary climate change-related disclosures made in their annual and sustainability reports by banks. The study also investigates factors impacting the extent of disclosures by using multiple regression and fractional regression analysis. Findings The findings of the research reveal that while the number of banks providing voluntary information on their climate change-related practices substantially increased from 2010 to 2016, there remains a significant number of banks that have not incorporated climate change-related issues into their lending policies or corporate strategies. Further, with regard to the regression analysis, the study documents the significant and positive impacts of bank size, profitability, bank age and listing status upon the extent of the climate change disclosures, in line with political cost and legitimacy theory. Practical implications The banking sector crucially impacts climate change indirectly, since banks provide financial backing to companies operating in environmentally sensitive industries. This paper presents empirical evidence of the factors impacting the extent of climate change disclosures by these banks, which might then be referred to by regulatory bodies when developing policies to promote environmentally responsible business practices within the banking industry. Social implications Several parties, which include governments, companies, financial institutions and non-governmental organizations (NGOs) must work together to fight climate change. In this sense, the NGOs and green activists have a crucial role in raising public awareness about climate change, which might then inspire financial institutions to incorporate climate change-related issues into their policies, operations and strategies. Originality/value The study extends the prior literature in two ways. This study has concentrated on environmental reporting practices in the banking sector which have been investigated in very few prior studies. Since prior research has focused on developed countries, this paper adds to the current literature by examining the environmental disclosure practices of commercial banks operating in Turkey, which is a rapidly developing country.

Does ownership type affect environmental disclosure?

“…However, firms’ environmental disclosures show significant variations. While, previous studies document that environmental disclosure is associated with numerous factors, including the concerns of stakeholders (Ali et al , 2017), firm’s strategy and vision, gender diversity (Baalouch et al , 2019), environmental performance (Baalouch et al , 2019; Giannarakis, 2018), size, age, listing status, profitability (Kılıç and Kuzey, 2019a), board independence and existence of a sustainability committee (Kılıç and Kuzey, 2019b) and macro-level dynamics such as political, labor and cultural systems (Baldini et al , 2018), the literature is yet to explain the influence of “ownership” on environmental disclosures. The ownership structure is one of the essential elements of governance mechanisms distinguishing firms’ behaviors from one another (Fama and Jensen, 1983) and structured by different determinants.…”

Environmental Factors and Bank Performance: How Financial Market Role Players React in Malaysia?

“…Environmental factors and banking industry are closely associated to each other where we have found a vast literature as contributed by (Alisjahbana and Busch, 2017;Bose et al, 2018;Buranatrakul and Swierczek, 2018;ElAlfy and Weber, 2019;Garg, 2015;Javeria et al, 2019;Kılıç and Kuzey, 2019;Lalon, 2015;Roy et al, 2015). One of the key contribution is provided by (Kılıç and Kuzey, 2019) who have analyzed the climate change determinants and its disclosure in the banking industry of Turkey. In addition, authors have analyzed those factors which are determining the voluntary level of disclosure for the climate change in the region of Turkey with the sample of 24 banking firms during the period of 2010-2016 on annual basis.…”

Banks and Climate-Related Information: The Case of Portugal

“…Two banks only presented information on energy efficiency or CO 2 reduction in the period of 2017-2019. Banks should highlight the importance of this climate-related information, like environmental reports, since it is considered as a reputational capital that can improve their financial performance [32,33]. Demaria et al [34], in a study performed in 2017 (France), also revealed a disclosure increment with the EU Directive.…”

“…They also reported how banks promote employees and community awareness through events, volunteering, and awards, among others. In Turkey, Kılıç and Kuzey [33] found few banks that implemented a board committee responsible for environmental issues, climate change, or GHG emissions. Banks should begin to implement a broader governance structure, ensuring that their boards have the appropriate level of oversight with clear reporting lines related to the climate and responsibilities [29].…”