Evaluating Corporate Carbon Disclosure Practices and Their Impact on Investor Confidence

Abstract

Climate change has intensified the scrutiny of corporate environmental practices, making carbon disclosure an essential component of sustainable business reporting. Carbon disclosure refers to the systematic reporting of greenhouse gas emissions, climate-related risks, and mitigation strategies. Transparent carbon reporting can enhance corporate accountability and influence investor decision-making by signaling environmental responsibility and long-term sustainability. This study evaluates the effectiveness of corporate carbon disclosure practices and examines their impact on investor confidence. A quantitative survey was conducted among 340 investors, financial analysts, and sustainability officers to assess perceptions of carbon disclosure comprehensiveness, reliability, and transparency. Structural Equation Modeling was employed to examine the relationships between disclosure quality, reporting consistency, stakeholder trust, and investor confidence. Results indicate that higher quality and more consistent carbon disclosure positively influence investor confidence. Stakeholder trust mediates this relationship, demonstrating that transparent and reliable reporting enhances the credibility of firms’ environmental commitments. Firms with comprehensive reporting frameworks, such as adherence to the Carbon Disclosure Project (CDP) and international standards, are perceived as more accountable, reducing perceived environmental risk and fostering investor confidence. The study contributes to the literature on environmental, social, and governance (ESG) reporting by providing empirical evidence linking carbon disclosure practices to financial market perceptions. Practically, findings emphasize the need for firms to adopt standardized disclosure frameworks, improve data reliability, and communicate emissions performance clearly to maintain investor trust. Limitations include reliance on self-reported perceptions and cross-sectional survey data. Future studies should incorporate longitudinal analyses and examine actual market reactions to carbon disclosure.