Nº 22-14: Do Firms Walk the Climate Talk?

Climate change is a major concern for many companies, but it has not historically featured much in earnings conference calls. We find a marked increase in climate talk on these calls in recent years. We also find that climate talk is negatively related to the change in CO2 emissions (especially Scope 2) in the year after the call, particularly in firms with high overall environmental and governance ratings. Conversely, investors react particularly negatively to climate talk when it comes from a firm with low levels of ESG performance or following poor earnings performance. Finally, a firm employs more climate talk when it is more material, when there is greater shareholder pressure or when it is better prepared for climate-related disclosure. Overall, these results suggest that investors and other stakeholders interested in corporate climate action should be paying attention to earnings conference calls as a source of useful information about companies' broader stance on climate-related issues.