Managerial forward-looking and firm environmental risk: Evidence from a machine learning approach

This study investigates how CEOs’ forward-looking orientation shapes corporate environmental performance. Using a machine learning approach, we construct a forward-looking orientation (FLO) index by analyzing the CEO’s linguistic patterns in earnings conference calls. Drawing on inter-temporal altruism theory, we predict and find that firms led by forward-looking CEOs exhibit significantly better environmental performance. The positive relationship is further amplified in firms with fewer financial constraints and greater stakeholder oversight. To address endogeneity, we employ instrumental variables leveraging cultural preferences in CEOs’ ancestral regions. Additionally, when forward-looking CEOs commit to improving environmental performance, they follow through with real actions by reducing future GHG emissions. Given that structured ESG disclosures often conflate genuine sustainable commitment with strategic greenwashing, our study offers a new perspective by identifying CEOs with forward-looking mindsets through unscripted communication, thereby driving corporate sustainability outcomes.