["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nThis paper investigates whether climate‐related disclosure (CRD) affects the financial performance of conventional banks (CBs) and Islamic banks (IBs) differently. Using a unique hand‐collected dataset on CRD for 591 banks (422 CBs and 169 IBs) from 24 countries over a 4‐year period, we examine how the relationship between CRD and financial performance varies across bank types. The results reveal a contrasting effect of CRD on the financial performance of the two bank types. Specifically, CBs experience a significant improvement in financial performance as the extent of their environmental and CRDs increases, whereas IBs exhibit a significantly negative relationship between CRD and financial performance. We attribute this disparity to CBs' comparative advantages, including greater market power, higher cost efficiency and more flexible governance structures, which enable them to derive greater benefits from CRD practices than IBs. This study contributes to the literature on nonfinancial disclosure and bank performance by highlighting the heterogeneous effects of CRD across banking models. The findings also have important policy implications for addressing climate change and advancing sustainable finance initiatives, particularly in the context of the Paris Agreement and COP26. More broadly, the study underscores the critical role of the banking sector in facilitating the transition to a more sustainable economy.\n"]