Firm-level Climate Change Exposure

103 Pages Posted: 13 Jul 2020 Last revised: 10 May 2021

See all articles by Zacharias Sautner

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Laurence van Lent

Frankfurt School of Finance and Management

Grigory Vilkov

Frankfurt School of Finance & Management

Ruishen Zhang

Shanghai University of Finance and Economics

Date Written: May 10, 2021

Abstract

We introduce a method that identifies climate change exposure from earnings conference calls of 10,158 firms from 34 countries. The method adapts a machine learning keyword discovery algorithm and captures exposures related to opportunity, physical, and regulatory shocks associated with climate change. The exposure measures exhibit cross-sectional and time-series variations that align with reasonable priors, and these measures are better at capturing firm-level variation than are carbon intensities or ratings. The exposure measures capture economic factors that prior work has identified as important correlates of climate change exposure. In recent years, exposure to regulatory shocks negatively correlates with firm valuations.

Keywords: Climate change, climate risk, conference calls, institutional investors

JEL Classification: G18, G32, G38, Q54, Q55

Suggested Citation

Sautner, Zacharias and van Lent, Laurence and Vilkov, Grigory and Zhang, Ruishen, Firm-level Climate Change Exposure (May 10, 2021). European Corporate Governance Institute – Finance Working Paper No. 686/2020, Available at SSRN: https://ssrn.com/abstract=3642508 or http://dx.doi.org/10.2139/ssrn.3642508

Zacharias Sautner (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Laurence Van Lent

Frankfurt School of Finance and Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

HOME PAGE: http://www.laurencevanlent.org

Grigory Vilkov

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

HOME PAGE: http://www.vilkov.net

Ruishen Zhang

Shanghai University of Finance and Economics ( email )

No. 777 Guoding Road, Shanghai
Shanghai, 200433
China

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