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Archive » March 2025 » Circular economy, corporate sustainability reporting and equity risk in European markets: first findings

Circular economy, corporate sustainability reporting and equity risk in European markets: first findings

Claudio Zara, Luca Bellardini, Federica Oliva
March 2025 - n. 3
Keywords: Circular economy, corporate sustainability reporting, equity risk
Jel codes: Q01, Q50, M14, G32

Alongside the surge in corporate non-financial disclosure (Nfd), investors and regulators are acknowledging the growing relevance of the circular economy (Ce) in sustainability, leading to a rise in the market for circular assets. This study investigates the relationship between a company's degree of circularity, its Nfd, and market-based equity risk. Using a sample of 644 entities listed in Eu-15 markets plus Switzerland, we find that circularity, when isolated from its Nfd component, is negatively associated with both total and systematic equity risk, confirming that the Ce acts as a de-risking factor independently of Nfd. However, additional analyses show that Nfd is not a standalone means for mitigating equity risk, but a signalling tool instead: to achieve de-risking, Nfd is necessary but, in isolation, not sufficient. These findings suggest that managers should engage more in circular business models, investors should increase circular assets in their portfolios, and policymakers should increase Nfd's scope and content for steering capital toward circular assets.

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