Measuring Climate Disclosure Credibility: Symbolic Versus Substantive Reporting Under TCFD in G7 Economies

Abstract

This study examines the credibility of climate‐related corporate disclosures by distinguishing between symbolic and substantive reporting practices. Drawing on institutional and signaling theories, we argue that firms facing common climate‐reporting expectations may differ in the substantive informational content through which they conform to those expectations. To operationalize disclosure credibility, we develop a Task Force on Climate‐related Financial Disclosures (TCFD)‐aligned measure that classifies disclosed information as symbolic or substantive for each TCFD recommendation, based on its specificity, quantification, firm‐specific content, and, where relevant, forward‐looking information. Using hand‐collected data from sustainability and annual reports of firms operating in G7 economies over 2019–2023, we construct a firm‐level measure capturing firms' reliance on symbolic relative to substantive disclosure. The associations between firm‐ and country‐level factors and disclosure credibility are examined using random‐effects GLS and two‐step system GMM estimation. The findings reveal substantial heterogeneity in climate disclosure credibility across G7 firms. Firm size and profitability are negatively associated with symbolic climate disclosure, while a critical mass of women directors is associated with higher disclosure credibility. In contrast, greater greenhouse gas emission intensity is associated with higher symbolic disclosure. At the country level, stronger regulatory quality is associated with higher disclosure credibility, whereas cultural individualism shows no robust association once endogeneity is addressed. Interaction analyses further indicate that the association between TCFD adoption and disclosure credibility varies with regulatory quality, whereas the association with board gender diversity varies with the rule of law. Overall, the findings show that firms' reliance on symbolic versus substantive climate reporting is systematically associated with firm characteristics, governance mechanisms, and the institutional environments in which firms operate.