Climate-related discussions in firms? 10-K: Who does it and what is its impact?

Abstract

We examine the impact of climate-related discussions in the Management Discussion & Analysis (MD&A) section of the 10-K filings of S&P 500 firms from 2007 to 2018 and find that only firms from three specific industries (Energy, Utilities and Finance) have such discussions. We also find that the increase in mention of climate related words and ngrams is significantly associated with a fall in holding period return (HPR), post the filing date and especially post the Paris agreement. This suggests that investors perceive higher climate change discussion in a negative light even without any change in fundamentals.