Deciphering the Drivers of Climate transparency in Malaysia: TCFD Perspective

Abstract

The pressure to address climate change by stakeholders pushes business players to pledge their climate commitment via reporting and disclosure. This mechanism signals the firm's climate adaptation and mitigation efforts, projecting their environmental performance. The study aims to investigate the drivers of climate transparency among publicly listed firms in Malaysia, with a focus on the perspectives of financial strength and corporate governance. Climate transparency is assessed based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, in parallel with Malaysia's regulatory requirements. By adopting a panel data analysis, the study found that leverage, firm size, and the adoption of innovation are significant drivers of climate transparency among firms in Malaysia. However, no significant relationship was found for profitability, sales growth, board independence, and CEO duality. The study provides valuable insights to help market players prepare for a compliance strategy as climate change reporting becomes mandatory in Malaysia in 2025 under the National Sustainability Reporting Framework.