Climate Exposure Drives Firm Political Behavior: Evidence from Earnings Calls and Lobbying Data

Abstract

The private sector drives much of climate politics, yet companies selectively choose specific issues and tactics for influence. When do firms engage in climate-related politics? In the face of multifaceted potential impacts from climate change, some firms expect increased costs from new regulation and should lobby against such proclimate policies. Another matter is relative risk. Firms with physical asset vulnerability and those with greater green business opportunity relative to their competitors should lobby in favor of pro-climate regulation. We proxy for exposure to these threats and opportunities by analyzing the amount of discussion paid to physical, regulatory, and technological opportunity aspects of climate change on quarterly earnings call transcripts for more than 2000 public firms between 2002 and 2020. We estimate the effect of variation in climate exposure on the type and level of political behavior used to influence climate policy through lobbying. We find that increased overall exposure to climate change increases the likelihood that firms engage in any climate-related lobbying, and that differences in exposure to physical risks, regulatory costs, and market opportunities explain across- and within-industry variation of political activity.