Accounting For Climate Risk:Disclosure Practices Of Kenyan Agricultural Firms

Abstract

Climate change poses a material and escalating financial risk to Kenya's agricultural sector, which contributes roughly a third of national output and remains highly exposed to drought, erratic rainfall, and shifting pest and disease patterns. As global reporting norms converge around the International Sustainability Standards Board's IFRS S2 on climate-related disclosures, Kenyan regulators have set a phased timetable culminating in mandatory adoption for public interest entities. This paper examines the extent, drivers, and quality of climate risk accounting disclosures among Kenyan agricultural firms listed on the Nairobi Securities Exchange. Drawing on legitimacy theory, stakeholder theory, and voluntary disclosure theory, and using a qualitative documentary review of corporate sustainability reports, regulatory guidance, and recent scholarship, the paper finds that disclosure remains narrative-heavy, voluntary, and inconsistent across firms, with a handful of pioneering companies moving ahead of formal requirements while most others lag behind in quantifying financial exposure to climate-related physical and transition risks. The paper argues that closing this gap requires coordinated regulatory enforcement, capacity building among preparers and auditors, and sector-specific guidance tailored to agriculture. It concludes with recommendations for standard-setters, regulators, professional accountants, and corporate boards.