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Firm-level climate change exposure and credit ratings

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  • Kilincarslan, Erhan
  • Li, Zezeng
  • Li, Jiafan

Abstract

We investigate how within-firm changes in climate-related risk disclosure affect credit rating quality among U.S. companies. Using 44,905 quarterly observations from 1546 firms spanning 2001 to 2023, we find that increases in a firm’s climate change exposure, measured by the relative frequency of climate discussion in earnings calls compared to the firm’s historical average, are positively associated with its credit ratings. This suggests that credit rating agencies reward greater transparency and proactive engagement with climate risks. Our results are robust across multiple identification strategies and highlight the growing importance of climate-related disclosure practices in corporate creditworthiness.

Suggested Citation

  • Kilincarslan, Erhan & Li, Zezeng & Li, Jiafan, 2025. "Firm-level climate change exposure and credit ratings," Economics Letters, Elsevier, vol. 255(C).
    • Handle: RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003490
    DOI: 10.1016/j.econlet.2025.112512
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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