Market reaction to climate risk report disclosures: The roles of investor attention and sentiment

Considering volitional disclosure of climate risk information, a question is whether investors react negatively to climate risk reports as highlighting new risks, or, alternatively, investors reward firm transparency initiatives. We evidence that enterprises that actively disclose climate risk information, such as emission reduction targets, are either rewarded or ignored by the market, consistent with our latter explanation. Results are consistent with disclosing of climate risk information signaling trustworthiness to investors. Further, closer analysis reveals our identified reactions are positively conditioned by the firm being state-owned; being a focus of greater investor attention, and being the recipient of negative investor sentiment.