Sustainability strategies and capital costs: A study of non-financial disclosure in the GCC agri-food industry

Abstract

In the Gulf Cooperation Council (GCC) region, the growing emphasis on sustainability, corporate responsibility, and transparency has significantly increased the relevance of non-financial disclosure. The GCC countries, known for their oil-dependent economies, are undergoing rapid diversification efforts, focusing on sustainable development and environmental stewardship. As companies, especially in sectors like agri-food, invest heavily in sustainability initiatives to align with global standards, non-financial disclosures become essential in communicating these efforts to investors, regulators, and stakeholders. This study investigates the impact of non-financial disclosure on the cost of capital within the GCC's agri-food sector from 2013–2024. The study uses panel data analysis to explore how Bloomberg's disclosure scores influence debt and equity costs for a sample of GCC-based agri-food firms. The results reveal a negative and significant relationship, indicating that higher levels of transparency through robust non-financial disclosures contribute to lowering firms' capital costs by improving their perceived creditworthiness and mitigating financial risks. This research contributes to the literature on non-financial disclosure and cost of capital. It provides crucial insights into how sustainability strategies and disclosures impact financial performance in a region where diversification and sustainable business practices are a key focus. The findings have important implications for policymakers, investors, and corporate managers in the GCC, suggesting that transparent sustainability reporting is vital for attracting investment, optimizing financial outcomes, and supporting the region's long-term economic transformation.