Does Talking the Climate Change Talk Affect Firm Value? Evidence from the Paris Agreement

We examine the impact of firms’ voluntary climate disclosure on the stock market’s reaction to climate change policy. Using the Paris Agreement as an exogenous shock to climate policy and novel measures of climate-related disclosure developed in recent literature, we find that carbon-intensive firms with greater discussion of climate change exposure in conference calls prior to the Agreement experience less negative market reaction around the announcement. We further find that the positive disclosure effect is driven primarily by discussions of climate-related opportunities (e.g., investment in renewable energy) and is stronger for firms located in states with more stringent environmental regulations. This effect holds even when the discussions are accompanied by risk statements or negative tones. Taken together, our findings suggest that for firms that are most prone to regulatory scrutiny, investors do not perceive ex ante climate disclosures as greenwashing or cheap talk, but rather as a positive signal about the firms’ climate change preparedness and their ability to navigate future regulations