Neither Purpose Nor Profit: Evidence from Climate conversations during earnings calls
By Shashwat Alok, Nishant Kashyap, Sudhir Voleti
Citation
Alok, Shashwat., Kashyap, Nishant., Voleti, Sudhir. (2024). Neither Purpose Nor Profit: Evidence from Climate conversations during earnings calls .
Copyright
2024
Share:
Abstract
This paper examines the implications of climate-related disclosure in conference calls for firms’ future financial performance and stock returns. Managers may use climate disclosure in earnings calls to provide information regarding the firm’s focus on sustainable practices or its strategies to mitigate exposure to climate-change risks. Alternatively, climate mentions in conference calls can be strategically used as an obfuscation
strategy by firms to hide bad news about current and future financial performance. A higher incidence of climate-related discussions in earnings calls predicts lower future
earnings, sales growth, and stock returns. Consistent with obfuscation, climate-related disclosure is not associated with improved environmental or ESG scores. The financial
markets do not discern the obfuscation strategy, which results in a delayed negative stock price reaction. A portfolio that buys firms in the lowest quintile of climate-related disclosure and shorts firms in the highest quintile earns up to 69 basis points per month
in Alpha (about 8% per year).

Shashwat Alok is an Associate Professor of Finance at the Indian School of Business (ISB). He joined ISB in 2013 after receiving his PhD in Finance from the Olin Business School, Washington University in St. Louis. He is currently the Research Director at the Digital Identity Research Initiative.

His primary research interests are in the areas of corporate finance. In particular, his research focuses on understanding the impact of the law, government policy, and institutions on firms and individual behaviour, with a greater focus on emerging markets. His recent work seeks to examine the role of alternative data and fintech in expanding financial inclusion, and the impact of climate change on firms and capital allocation.

Professor Alok is the recipient of multiple prestigious grants, and his work has been accepted at leading international conferences such as those hosted by the American Finance Association, the Asian Bureau of Finance and Economic Research, the European Finance Association, and the Financial Intermediation Research Society. His research has been published or accepted in top academic journals such as the Review of Financial Studies, Management Science, and the Journal of Financial and Quantitative Analysis. Prof Alok's research has been cited by the Indian Economic Survey (2018-2019) and the Reserve Bank of India's Household Finance Committee Report (2017). His research has also featured in major Indian media outlets, including the Economic Times and the Times of India.

Before joining the PhD programme, he graduated among the top of his class in Computer Science and Engineering from the Manipal University. He was the recipient of the Hubert C. Moog Scholar for academic excellence while pursuing his PhD at the Washington University in St Louis.

Shashwat Alok
Shashwat Alok

Sudhir Voleti is an Associate Professor of Marketing at the Indian School of Business (ISB), where he is also a distinguished faculty member in Business Analytics. A renowned researcher in the fields of marketing research and business analytics, he has previously served as Associate Dean of Faculty Alignment and the Registrar's Office (FARO) at ISB.

Professor Voleti holds a PhD in Marketing and an MS in Applied Statistics from the University of Rochester, a PGDM from Indian Institute of Management (IIM) Calcutta, and a BE from the Birla Institute of Technology, Ranchi, along with years of industry experience.

Professor Voleti is recognised as one of India's leading data science academicians. His research focuses on combining data with econometric and statistical methods to explain phenomena of marketing interest such as evolution in the equity of brands across time, valuation of brands using secondary sales data, the sales impact of geographic and abstract distances between products and markets, and the performance, productivity, and benchmarking of salesforce organisations.

Professor Voleti has published numerous research articles in leading academic journals such as Management Science, Journal of Marketing, Journal of the Royal Statistical Society, the International Journal of Research in Marketing, and the Journal of Retailing, as well as book chapters and articles in the popular media. He also serves on the editorial review boards of numerous journals. Some of his significant works include "Impact of Reference Prices on Product Positioning and Profits", "The role of big data and predictive analytics in retailing", "Why the Dynamics of Competition Matter for Category Profitability", "A Bayesian non-parametric model of residual brand equity in hierarchical branding structures", and "An Approach to Improve the Predictive power of Choice - Based Conjoint Analysis".

Sudhir Voleti
Sudhir Voleti