GRADUATE RESEARCH DISSERTATIONS
CHAIR: SUNAY MUTLU, PH.D. | SECOND: DIVESH SHARMA, PH.D. | READER: KELLY HA, PH.D.
FIRM-LEVEL CLIMATE CHANGE EXPOSURE AND ANALYSTS’ INFORMATION
BUSINESS IMPACT
SCHOLARLY ABSTRACT
This study examines whether firm-level climate change exposure is associated with financial analysts’ information environment. As climate change is becoming an increas - ingly prominent global topic and firms are disclosing more information regarding climate change risks and opportu - nities, it is important to understand whether this infor - mation is useful to participants in the capital market. This study extends prior research by focusing on a specific as - pect of corporate social responsibility (CSR) disclosure— climate change exposure—and its relationship with ana - lysts’ forecasts. Specifically, I investigate whether a firm’s score for climate change exposure derived from earnings calls is associated with increased usefulness to analysts as evidenced by analysts’ forecast properties. Results show a negative association between climate change mentions in earnings calls and the number of analysts following a firm, the accuracy of analysts’ forecasts, and analysts’ fore - cast revisions, and a positive association between climate change mentions in earnings calls and analysts’ forecast dispersion. These findings should be of interest to aca - demics, practitioners, and standard setters, as the results suggest that either financial analysts do not find climate change mentions in earnings calls to be useful in their analyses or that analysts may interpret the climate change mentions as greenwashing. Keywords: Climate Change Exposure, Analyst Forecasts, Information Environment, Earnings Calls, ESG Disclosure, Corporate Social Responsibility, Greenwashing, Forecast Accuracy, Analyst Following, Capital Markets.
Climate mentions in earnings calls are linked to lower analyst coverage and accuracy, and higher dispersion. Simply talking more about climate in earnings calls, with - out clear, decision‑useful metrics and explanations, can ac - tually reduce the usefulness of analyst coverage (fewer ana - lysts, more disagreement, less accuracy). Investor‑relations and CFO teams should tighten climate-related messaging around concrete financial mechanisms, not high‑level rhet - oric, to avoid being discounted as noise or greenwashing.
Analysts may be treating many climate disclosures as potential greenwashing.
ESG or sustainability teams need to coordinate closely with finance and legal to ensure climate statements are supported by verifiable actions (capex, risk mitigation, scenario analysis). This can protect credibility with the sell‑side and reduce the risk that markets ignore or penal - ize your climate narrative. A novel bigram-based climate exposure metric from earnings calls provides a granular way to measure firm-level climate discussion. Corporates and asset managers can repurpose this type of text‑analytics approach internally (e.g., across transcripts and filings) to benchmark their own climate communica - tion against peers—and to monitor whether shifts in nar - rative are associated with better or worse analyst behavior (coverage, forecast quality).
LESYA STALLINGS, PH.D.
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