Cheap Talk in Corporate Climate Commitments: The effectiveness of climate initiatives

60 Pages Posted: 28 Feb 2022 Last revised: 21 Jun 2022

See all articles by Julia Bingler

Julia Bingler

Council on Economic Policies

Mathias Kraus

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Markus Leippold

University of Zurich; Swiss Finance Institute

Nicolas Webersinke

Friedrich-Alexander-Universität Erlangen-Nürnberg

Multiple version iconThere are 2 versions of this paper

Date Written: January 2, 2022

Abstract

Corporate climate disclosures are considered an essential prerequisite to managing climate-related financial risks. At the same time, current disclosures are imprecise, inaccurate, and greenwashing-prone. We introduce a deep learning approach to enable comprehensive climate disclosure analyses by fine-tuning the \climatebert model. From 14,584 annual reports of the MSCI World index firms from 2010 to 2020, we extract the amount of cheap talk, defined as the share of precise versus imprecise climate commitments. We then test various hypotheses by linking three different climate initiatives, namely the Task Force on Climate-Related Financial Disclosure, the Science-Based Targets Initiative, and the Climate Action 100+, to the economic channels of signaling, credibility, and active engagement. In particular, we ask whether these initiatives decrease cheap talk by disciplining companies in how they define and disclose actionable climate commitments in their annual reports.

Keywords: Corporate climate disclosures, voluntary reporting, commitments, TCFD recommendations, textual analysis, natural language processing

JEL Classification: G2, G38, C8, M48

Suggested Citation

Bingler, Julia and Kraus, Mathias and Leippold, Markus and Webersinke, Nicolas, Cheap Talk in Corporate Climate Commitments: The effectiveness of climate initiatives (January 2, 2022). Swiss Finance Institute Research Paper No. 22-54, Available at SSRN: https://ssrn.com/abstract=3998435 or http://dx.doi.org/10.2139/ssrn.3998435

Julia Bingler

Council on Economic Policies ( email )

Zurich
Switzerland

Mathias Kraus

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

Markus Leippold (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Nicolas Webersinke

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Lange Gasse 20,
Nürnberg, 90403
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,317
Abstract Views
3,641
rank
14,331
PlumX Metrics