Climate Related Financial Risk Disclosure and the Stability of Listed Deposit Money Banks in Nigeria: A Conceptual Review

Jul 1
1 min read

Authors: Murtala Aliyu Ibrahim

Abstract

Climate change has emerged as a systemic source of financial risk that conventional prudential frameworks were not designed to address (Bolton et al., 2020). For Listed Deposit Money Banks in Nigeria (DMBs), exposure to drought, flooding, oil sector transition risk, and policy shifts toward a low-carbon economy presents a complex layer of credit, market, operational, and reputational risk (TCFD, 2017). This paper conceptually examines the relationship between climate-related financial risk disclosure and the stability of listed DMBs in Nigeria, in the light of the Central Bank of Nigeria Sustainable Banking Principles (CBN, 2012), the Nigerian Roadmap for the Adoption of IFRS Sustainability Disclosure Standards (FRC Nigeria, 2024; FRC Nigeria, 2026), and the IFRS S2 Climate-related Disclosures Standard (ISSB, 2023). Drawing on Stakeholder Theory (Freeman, 1984), Legitimacy Theory (Deegan, 2002), and Agency Theory (Jensen and Meckling, 1976), the paper argues that high-quality climate risk disclosure functions as a market discipline mechanism that strengthens depositor confidence, reduces information asymmetry, and supports capital adequacy under stress scenarios. The paper proposes a conceptual model linking governance, strategy, risk management, and metrics-and-targets disclosures to three measurable stability outcomes: asset quality, capital buffers, and funding cost. It concludes that integrating climate risk disclosure into the existing Enterprise Risk Management and Internal Control over Financial Reporting frameworks of listed DMBs in Nigeria is a practical and measurable pathway to long-term resilience. Implications for regulators, bank executives, auditors, and academic research are presented.

Keywords: climate risk, financial disclosure, IFRS S2, deposit money banks, financial stability, sustainable banking