Firm valuation under climate uncertainty: the role of climate risk exposure and disclosure practices

Wang, B, Mirza, N, Umar, M and Shan, S ORCID: https://orcid.org/0000-0003-4928-588X, 2025. Firm valuation under climate uncertainty: the role of climate risk exposure and disclosure practices. International Review of Financial Analysis, 108 (B): 104724. ISSN 1057-5219

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Abstract

This study examines how climate-related exposures and firm-level disclosure practices are reflected in the valuation of non-financial firms across the Eurozone between 2016 and 2023. We leverage a multi-dimensional valuation framework and draw on Tobin’s Q, EV/EBITDA, and Residual Income as valuation tools. Our findings reveal that both physical climate risk and carbon intensity are negatively associated with firm value, highlighting the extent to which environmental exposures are now being priced into strategic, operational, and financial assessments. In contrast, firms engaging in structured climate disclosures are systematically rewarded with valuation premiums, especially when operating in high-risk contexts. Moreover, we find that the adverse valuation effects of emissions are significantly mitigated in larger firms, suggesting that organizational scale confers resilience in managing transition costs. These results highlight the increasing financial materiality of climate risk and the critical role of transparency and capacity in shaping market-based outcomes. The findings carry important implications for regulators advancing disclosure mandates, investors embedding ESG into capital allocation, and corporate leaders seeking to align strategic value creation with long-term environmental accountability.

Item Type:	Journal article
Publication Title:	International Review of Financial Analysis
Creators:	Wang, B., Mirza, N., Umar, M. and Shan, S.
Publisher:	Elsevier BV
Date:	December 2025
Volume:	108
Number:	B
ISSN:	1057-5219
Identifiers:	Number Type 10.1016/j.irfa.2025.104724 DOI 2526739 Other
Divisions:	Schools > Nottingham Business School
Record created by:	Laura Borcherds
Date Added:	14 Nov 2025 17:23
Last Modified:	14 Nov 2025 17:23
URI:	https://irep.ntu.ac.uk/id/eprint/54747

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