Abstract
International organizations have highlighted the importance of consistent and reliable environment,
social and governance (ESG) disclosure and metrics to inform business strategy
and investment decisions. Greater corporate disclosure is a positive signal to investors
who prioritize sustainable investment. In this study, economic and climate sentiment are
extracted from the integrated and sustainability reports of the top 40 corporates listed on
the Johannesburg Stock Exchange, employing domain-specific natural language processing.
The intention is to clarify the complex interactions between climate risk, corporate disclosures,
financial performance and investor sentiment. The study provides valuable insights
to regulators, accounting professionals and investors on the current state of disclosures
and future actions required in South Africa. A time series analysis of the sentiment scores
indicates a noticeable change in the corporates’ disclosures from climate-related risks in
the earlier years to climate-related opportunities in recent years, specifically in the banking
and mining sectors. The trends are less pronounced in sectors with good ESG ratings.
An exploratory regression study reveals that climate and economic sentiments contain
information that explain stock price movements over the longer term. The results have
important implications for asset allocation and offer an interesting direction for future
research. Monitoring the sentiment may provide early-warning signals of systemic risk,
which is important to regulators given the impact on financial stability