Analysts’ Perspectives on Climate Change: An Examination of Analyst Reports

ABSTRACT

I explore the nature of analysts’ climate-related discussion in their reports. Focusing on industries most exposed to climate change, I find very few reports (less than 2 percent) and a minority of analysts (less than 11 percent) discuss climate-related topics. Analysts concentrate climate-related discussion among utilities, mostly discussing renewable energy and regulatory issues. These discussions exhibit no significant association with short-term earnings forecasts and a weak association with more pessimistic long-term growth forecast revisions. Climate-related discussion is also associated with more optimistic target prices when analysts do not issue long-term growth forecasts, suggesting the development of a long-term perspective correlates with views on climate-related issues. Discussions of solar-, emissions-, and automotive-related topics are associated with this greater target price optimism. These findings highlight how analysts’ climate-related discussion relates to long-term expectations and concentrates among highly exposed firms.

Data Availability: Data are available from the public sources cited in the text. A detailed listing of how each large language model (LLM) classified each climate-related report, a document describing the details of this listing, a firm-year summary of climate-related discussion and subtopical classifications, and a description document of this firm-year summary are available upon request.

JEL Classifications: Q56; G24; M41.