Show & tell: an analysis of corporate climate messaging and its financial impacts
File(s)
Accepted version
Author(s)
Aldy, Joseph E
Bolton, Patrick
Halem, Zachery M
Kacperczyk, Marcin T
Type
Journal Article
Abstract
As climate-induced physical and transition risks to corporations are becoming more and more material, investors are increasingly scrutinizing a patchwork of voluntary climate-related public communications, namely emission disclosures, emission reduction commitments, and soft information from earnings calls and other corporate announcements. We observe, for large-cap US firms, a rise in the usage of all forms of climate communication from 2010 to 2020. Public communication is commonly used by firms in emission-intensive sectors, such as industrials, materials, and utilities. We provide evidence that increased transparency from disclosure, especially of scope 1 and scope 2 emissions, can offset a significant portion of the P/E discount associated with carbon emissions, especially for firms in the energy and industrial sectors. A similar offsetting effect is observed for positive climate-related sentiment during earnings calls Q&A, but not for the management update section of earnings calls. In contrast, decarbonization commitments have a subsequent statistically insignificant impact on valuation.
Date Issued
2025-01-17
Date Acceptance
2024-12-16
Citation
Financial Analysts Journal, 2025, 81 (1), pp.82-101
ISSN
0015-198X
Publisher
Taylor and Francis Group
Start Page
82
End Page
101
Journal / Book Title
Financial Analysts Journal
Volume
81
Issue
1
Copyright Statement
Copyright © 2025 CFA Institute. This is the author’s accepted manuscript made available under a CC-BY licence in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy)
License URL
Identifier
https://doi.org/10.1080/0015198x.2024.2444384
Subjects
2
Business & Economics
Business, Finance
Carbon emissions
climate change
disclosure
earnings calls
financial cost of carbon
IMPLIED EQUITY DURATION
science-based and CDP targets
Social Sciences
SUSTAINABILITY
Publication Status
Published
Date Publish Online
2025-01-17