Show & Tell: An Analysis of Corporate Climate Messaging and Its Financial Impacts
Joseph E. Aldy et al.
Abstract
As climate-induced physical and transition risks to corporations are becoming more and more material, investors are increasingly scrutinizing a patchwork of voluntary climate-related public communications, namely emission disclosures, emission reduction commitments, and soft information from earnings calls and other corporate announcements. We observe, for large-cap US firms, a rise in the usage of all forms of climate communication from 2010 to 2020. Public communication is commonly used by firms in emission-intensive sectors, such as industrials, materials, and utilities. We provide evidence that increased transparency from disclosure, especially of scope 1 and scope 2 emissions, can offset a significant portion of the P/E discount associated with carbon emissions, especially for firms in the energy and industrial sectors. A similar offsetting effect is observed for positive climate-related sentiment during earnings calls Q&A, but not for the management update section of earnings calls. In contrast, decarbonization commitments have a subsequent statistically insignificant impact on valuation.
4 citations
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.37 × 0.4 = 0.15 |
| M · momentum | 0.60 × 0.15 = 0.09 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.