How do firms disclose environmental information on climate change in aspects of both business risks and opportunities?

Corporate disclosure of environmental information has played an important role in the avoidance of dangerous climate change. How firms choose to disclose environmental information about the business opportunities and risks associated with climate change is important to policy makers and investors. In the literature, there are two dominant theories of corporate disclosure: legitimacy theory and voluntary dis-closure theory. Under legitimacy theory, firms are more likely to disclose information in response to their risks; under voluntary disclosure theory, firms are more likely to disclose information in response to their opportunities. In certain industries, if firms disclose environmental information according to legitimacy theory (voluntary disclosure theory), society may be unaware of the true risks (opportunities) of climate change, and society, in these cases, we will need policies that mandate disclosure. Therefore, this study examines the power of legitimacy theory and voluntary disclosure theory to explain corporate disclosure in three industry groupings: manufacturing, non-manufacturing, and energy & utilities. We use Bloomberg' s Carbon Disclosure Project (CDP) dataset of 3,861 firm level observations from 2008-2012, and regress the corporate social disclosure score evaluated by Bloomberg on variables that indicate regulatory and physical risks and opportunities. We find that legitimacy theory does not explain corporate disclosure of regulatory risks in any of the industries and that of physical risk in the energy and utilities industry. In addition, vol-untary disclosure theory does not explain disclosure of regulatory opportunities in the energy & utilities industries. However, voluntary disclosure theory explains disclosure of opportunities in all of the industries.