Tegar Ditya Pragama

Type of the article: Research Article

Abstract
The global imperative to address climate change has transformed financial markets, yet the mechanisms through which carbon disclosure influences investor decisions remain insufficiently understood. Prior reviews characterize findings as inconclusive due to inadequate mechanism specification and contextual variation, leaving policymakers, corporate managers, and investment professionals without evidence-based guidance. This review synthesizes evidence examining how carbon disclosure is associated with investment decisions through distinct mechanisms across varying contexts. Following PRISMA 2020 guidelines, we systematically searched Scopus and Web of Science databases, identifying 228 unique records published between 2020 and 2025. After rigorous screening, we extracted and synthesized data from 10 empirical studies examining disclosure mechanisms, contextual moderators, and methodological quality. Evidence suggests that carbon disclosure is associated with investor responses through hierarchical mechanisms, where information asymmetry reduction serves as the foundational pathway enabling risk communication and signaling. Mandatory disclosure regimes tend to generate stronger effects than voluntary approaches, while high-carbon sectors demonstrate comparatively larger investor responses, likely reflecting greater climate risk materiality. Post-2020 findings indicate heightened associations compared to pre-2020 periods, consistent with regulatory acceleration and market maturation. Methodological quality substantially shapes observed findings, with quasi-experimental approaches providing more conservative and causally credible estimates than observational designs. Overall, disclosure effectiveness appears to depend on mechanism activation, institutional context, and measurement quality. These findings offer preliminary evidence-based guidance for designing mandatory disclosure frameworks, developing corporate disclosure strategies, and integrating climate risks into institutional investment practices, though conclusions should be interpreted cautiously given the limited sample of studies and heterogeneity across research designs.

Acknowledgments
We acknowledge the institutional support provided by Universitas Mercu Buana, Universitas Trisakti, and Akademi Digital Bandung in conducting this research.