The Evolution of Environmental Discourse: Evidence from Conference Calls

We examine the evolution of environmental discourse in conference calls and whether and how this discourse affects firm valuation. We measure the amount of environmental discourse as the frequency count of environmentally-related topics in the transcripts of conference calls. We find that environmental discourse increased substantially from 2006 to 2020 and that discourse is incrementally informative – beyond environmental performance metrics and environmental disclosures – for firm valuation. Specifically, we find that greater environmental discourse in conference calls is associated with higher cost of capital and lower share price, which we interpret as suggesting that discussion of environmental topics increases uncertainty. We also find that the amount of discourse in the prepared remarks portion of conference calls dominates that in the Q&A portion as an explanatory factor for firm value. We complement our analysis by examining the value-relevance of general ESG (Environmental, Social, and Governance) discussion and show that more general ESG discourse is associated with lower cost of capital and higher share price, implying a more favorable valuation impact of general discussions of social and governance issues.