Corporate Climate Risk:
Measurements and Responses
Qing Li, Hongyu Shan, Yuehua Tang, and Vincent Yao
The Review of Financial Studies, Volume 37, Issue 6, June 2024, Pages 1778–1830.
Please click here to access the pre-print version.
Research Introduction
This research utilizes earnings call transcripts of U.S. public companies to quantify their climate risk exposure. The research introduces a novel approach, distinguishing between physical and transition climate risks and measuring firms' proactive responses. Overcoming challenges in textual analysis, the research validates the effectiveness of these measures. Notably, it explores the pricing effects of climate risk in equity markets, uncovering nuanced firm responses to transition risk. By examining investment, innovation, and employment outcomes, the research provides valuable insights into financial market dynamics and real-world responses to climate change, addressing a critical gap in the current literature. One key finding of our study is that firms that face higher transition risk, especially those that do not respond proactively, are valued at a discount in the equity market.
Data
Our firm-level climate risk data is constructed based on earnings call transcript data from January 2002 through October 2023. We measure the climate risk faced by a given firm at a given time based on the share of earnings calls conversations that are centered on physical climate risk and transition risk, respectively.
Click to get our original data, up until 2018.
Click to get our data extension, from 2019 to 2023.
Please kindly cite our research when using the data:
Qing Li, Hongyu Shan, Yuehua Tang, and Vincent Yao, Corporate Climate Risk: Measurements and Responses, The Review of Financial Studies, Volume 37, Issue 6, June 2024, Pages 1778–1830, https://doi.org/10.1093/rfs/hhad094
Dictionary
Click to get our Climate Risk Dictionary.
This revised version of the climate risk dictionaries is based on our paper on firm-level climate risk exposures: Li, Shan, Tang, and Yao (RFS, 2024). We developed three separate dictionaries to measure different types of climate-related risks: (i) acute physical risk, (ii) chronic physical risk, and (iii) transition risk. While we have made much effort to ensure accuracy, this list may contain errors, and users should exercise caution when applying the information. We hope this resource proves valuable to others in understanding and addressing climate risks. Please cite our paper when using this dictionary, and don't hesitate to reach out with any feedback or suggestions for further improvement.
Our Team
This is our research team.