Corporate Climate Risk: Measurements and Responses

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

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