How Cheap Talk in Climate Disclosures relates to Climate Initiatives, Corporate Emissions, and Reputation Risk

62 Pages Posted: 5 Jan 2022 Last revised: 27 Feb 2024

See all articles by Julia Bingler

Julia Bingler

University of Oxford

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

Date Written: January 3, 2022

Abstract

Navigating the complex landscape of corporate climate disclosures and their real impacts is crucial for managing climate-related financial risks. However, current disclosures oftentimes suffer from imprecision, inaccuracy, and greenwashing. We introduce \climatebertcti, a deep learning algorithm, to identify climate-related cheap talk in MSCI World index firms' annual reports. We find that only targeted climate engagement is associated with less cheap talk. Voluntary climate disclosures are associated with more cheap talk. Moreover, cheap talk correlates with increased negative news coverage and higher emissions growth. Hence, cheap talk helps assess climate initiatives' effectiveness and anticipate reputation and transition risk exposure.

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, How Cheap Talk in Climate Disclosures relates to Climate Initiatives, Corporate Emissions, and Reputation Risk (January 3, 2022). Swiss Finance Institute Research Paper No. 22-01, Available at SSRN: https://ssrn.com/abstract=4000708 or http://dx.doi.org/10.2139/ssrn.4000708

Julia Bingler

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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

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