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How cheap talk in climate disclosures relates to climate initiatives, corporate emissions, and reputation risk

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  • Bingler, Julia Anna
  • Kraus, Mathias
  • Leippold, Markus
  • Webersinke, Nicolas

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.

Suggested Citation

  • Bingler, Julia Anna & Kraus, Mathias & Leippold, Markus & Webersinke, Nicolas, 2024. "How cheap talk in climate disclosures relates to climate initiatives, corporate emissions, and reputation risk," Journal of Banking & Finance, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:jbfina:v:164:y:2024:i:c:s0378426624001080
    DOI: 10.1016/j.jbankfin.2024.107191
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    Keywords

    Corporate climate disclosures; Voluntary reporting; Commitments; Greenhouse gas emissions; Negative news coverage; Textual analysis;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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