Disclosures of banks’ sustainability reports, climate change and central banks: An empirical analysis with unstructured data

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Abstract

Climate change will impact the economy in the long term but also in the medium run potentially affecting financial stability and the whole economic system (Nyambuu & Semmler, 2023). Some studies suggested that climate change may hit financial actors even if there are few studies related to the role of banks’ sustainability disclosure and central banks’ mandates. This paper examines the sustainability reports disclosures of the banks listed on the FTSE Italia All-Share Italian Stock Exchange for the year 2021–2020. It applies five kinds of multivariate techniques on unstructured data using Iramuteq (www.iramuteq.org) and SAS Viya (www.sas.com). The article tries to assess how and whether banks are disclosing transition and physical risk, and how and whether they conducted scenario analysis through the lens of the Task Force on Climate-related Financial Disclosures (TCFD) framework. Even though banks provided environmental, social, and governance (ESG) disclosure, they paid scant attention to furnishing climate change information to market and central banks, and to prioritize their complying with international frameworks. The article addresses the main research gap in the literature review and focuses on the role of disclosures and central banks’ mandates, sustainability data gap and solutions through machine learning, analysis of deep uncertainty for monetary policy, and the use of scenario analysis when it is impossible to apply deterministic or probabilistic approaches and text mining for central banks in the context of unstructured data.

Keywords: Climate Change, Central Banks, Disclosure, Text Analytics, Quantitative and Qualitative Research

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: G10, G20, G30, K32

Received: 19.09.2023
Accepted: 19.03.2024
Published online: 22.03.2024

How to cite this paper: Aversa, D. (2024). Disclosures of banks’ sustainability reports, climate change and central banks: An empirical analysis with unstructured data. Risk Governance and Control: Financial Markets & Institutions, 14(1), 76–102. https://doi.org/10.22495/rgcv14i1p6