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Cheap Talk in Corporate Climate Commitments: The effectiveness of climate initiatives

Author

Listed:
  • Julia Anna Bingler

    (Council on Economic Policies (CEP); ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich)

  • Mathias Kraus

    (University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg)

  • Markus Leippold

    (University of Zurich; Swiss Finance Institute)

  • Nicolas Webersinke

    (riedrich-Alexander-Universität Erlangen-Nürnberg)

Abstract

Corporate climate disclosures are considered an essential prerequisite to managing climate-related financial risks. At the same time, current disclosures are imprecise, inaccurate, and greenwashing-prone. We introduce a deep learning approach to enable comprehensive climate disclosure analyses by fine-tuning the \climatebert model. From of 14,584 annual reports of the MSCI World index firms from 2010 to 2020, we extract the amount of cheap talk, defined as the share of precise versus imprecise climate commitments. We then test various hypotheses on the drivers of cheap talk. In particular, we ask whether climate initiatives discipline companies in the way they define and disclose actionable climate commitments in their annual reports.

Suggested Citation

  • Julia Anna Bingler & Mathias Kraus & Markus Leippold & Nicolas Webersinke, 2022. "Cheap Talk in Corporate Climate Commitments: The effectiveness of climate initiatives," Swiss Finance Institute Research Paper Series 22-54, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2254
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    More about this item

    Keywords

    Corporate climate disclosures; voluntary reporting; commitments; TCFD recommendations; textual analysis; natural language processing;
    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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