Corporate Climate Risk: Measurements and Responses

63 Pages Posted: 8 Jan 2020 Last revised: 3 Dec 2021

See all articles by Qing Li

Qing Li

University of Florida - Department of Finance, Insurance and Real Estate

Hongyu Shan

Fordham University - Finance Area; China Europe International Business School (CEIBS)

Yuehua Tang

University of Florida - Department of Finance

Vincent Yao

Georgia State University - J. Mack Robinson College of Business

Date Written: July 2, 2020

Abstract

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

Li, Qing and Shan, Hongyu and Tang, Yuehua and Yao, Vincent, Corporate Climate Risk: Measurements and Responses (July 2, 2020). Available at SSRN: https://ssrn.com/abstract=3508497 or http://dx.doi.org/10.2139/ssrn.3508497

Qing Li

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Hongyu Shan

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Yuehua Tang (Contact Author)

University of Florida - Department of Finance ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/yuehuatang

Vincent Yao

Georgia State University - J. Mack Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States

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