Corporate Climate Risk: Measurements and Responses
63 Pages Posted: 8 Jan 2020 Last revised: 3 Dec 2021
Date Written: July 2, 2020
This paper quantifies climate risk exposure at the firm level by conducting a textual analysis using earnings call transcript data. We construct dictionaries that measure physical and transition climate risks separately and identify firms that respond proactively. We validate our measures in a variety of ways and find that they capture firm-level variations in respective climate risk exposure. Firms facing higher transition risk, especially those that do not respond proactively, have been valued at a discount in recent years as aggregate investor attention to climate-related issues rises. Firms respond through investment and employment differently when their climate risk exposure increases.
Keywords: Climate risk, Transition Risk, Climate finance, Earnings calls, Valuation, Textual analysis
JEL Classification: G12; G31; C82; E44
Suggested Citation: Suggested Citation