Corporate Climate Risk: Measurements and Responses
Review of Financial Studies, Forthcoming
82 Pages Posted: 8 Jan 2020 Last revised: 21 Jan 2025
Date Written: July 2, 2020
Abstract
This paper conducts a textual analysis of earnings call transcripts to quantify climate risk exposure at the firm level. We construct dictionaries that measure physical and transition climate risks separately and identify firms that proactively respond to climate risks. Our validation analysis shows that our measures capture firm-level variations in respective climate risk exposure. Firms facing high transition risk, especially those that do not proactively respond, have been valued at a discount in recent years as aggregate investor attention to climate-related issues has been increasing. We document differences in how firms respond through investment, green innovation, and employment when facing high climate risk exposure.
Keywords: Climate risk, Transition Risk, Climate finance, Earnings calls, Valuation, Textual analysis
JEL Classification: G12; G31; C82; E44
Suggested Citation: Suggested Citation