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 both financial market dynamics and real-world responses to climate change. The study's comprehensive approach, covering diverse sectors, offers a credible and timely assessment of climate risk exposure, 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. Horse-race analyses show that our measures offer unique value for studying how capital markets price climate risk, particularly transition risk.