The Impact of Climate Change Accounting Disclosure on Investment Decision-Making (A Field Study on a Sample of Sudanese Companies)

Mukhtar Idris Abubakr Adam, Assistant Professor

Abstract

The study aimed to examine the impact of climate change accounting disclosure on investment decision-making, with a particular focus on its role in reducing information asymmetry and enhancing market efficiency, through a field study conducted on a sample of Sudanese companies. The study stems from the problem of weak and inconsistent climate-related disclosure within the Sudanese business environment, and the resulting increase in uncertainty and cost of capital. The study adopted the descriptive approach, and data were collected using a questionnaire designed according to the five-point Likert scale. The data were analyzed using simple linear regression models through the SPSS program to test the hypotheses. The results revealed that the level of climate change accounting disclosure among the companies under study remains moderate; however, it demonstrates a positive trend toward enhancing transparency and voluntary disclosure. The findings also indicated a statistically significant positive relationship between climate disclosure and the quality of investment decisions, where the correlation coefficient reached (R = 0.68) and the coefficient of determination (R² = 0.46), indicating that climate disclosure represents an important determinant in investors’ assessment of future risks and returns. Furthermore, the study proved that the absence of adequate disclosure regarding climate risks leads to a significant increase in the cost of capital (R = 0.78, R² = 0.51), due to the higher perceived risks among investors and lenders. The study concludes that climate change accounting disclosure represents an effective governance mechanism for improving the quality of financial and non-financial reporting, enhancing investor confidence, and directing capital flows toward companies that are more committed to sustainability. The study recommends the development of regulatory frameworks and environmental disclosure standards aligned with international standards in order to support the efficiency of financial markets in emerging economies.