Climate change information and analyst expectations
This study examines whether analysts facilitate the processing and impounding of climate information into financial expectations. Using survey data from CDP (formerly the Carbon Disclosure Project) about firms’ self-identified climate-related risks along with over 1 million analyst reports from ThomsonOne, I find climate disclosures foreshadow future financial performance for firms in industries most exposed to climate change and analysts revise target prices for these firms. Very few (<1%) analyst reports discuss climate related topics, but market participants find discussion of these topics informative for most exposed firms. Markets take time to process and incorporate this discussion into security prices. Results suggest analysts’ incorporation of climate information remains nascent and we should exercise caution in assuming analysts broadly incorporate climate-related information. My findings add to our understanding of how market participants process climate disclosures.