Climate Talk in Earnings Calls: Effects on Analyst Forecasts and Environmental Strategies

Using 48,329 observations across 6,696 unique U.S. firms, we examine the relationship between corporate climate discourse during earnings calls, analyst predictions, and corporate environmental practices. Our findings demonstrate that an increase in executives’ climate-related discourse, potentially a form of impression management, correlates with higher analyst forecast bias and dispersion. Executive discourse also prompts analyst attention, leading to more climate-focused inquiries. Further analysis shows that firms enhance their environmental performance in the subsequent year when analysts ask climate-related questions, suggesting that such dialogue could incentivize corporations to improve their environmental efforts to meet stakeholder expectations and maintain legitimacy. We also analyze executive responses to climate inquiries, noting a preference for complex, subjective responses with a positive tone. This illustrates how corporations manage climate disclosures to preserve strategic resources while meeting stakeholder expectations. Our findings highlight the importance of effective communication during earnings calls and the need for transparent disclosure standards for climate strategies and performance, with implications for executives and analysts regarding strategic communication and accountability for environmental performance.