Companies on the receiving end of coordinated shareholder engagement are less likely to make empty statements about climate change in their annual reports, according to academic research.

A study looking into the impact of key sustainable finance initiatives on the disclosure practices of companies found that those targeted by Climate Action 100+ (CA100+) had lower levels of ‘cheap talk’ in their public statements.

Cheap talk is defined in the research as non-specific green promises or claims, according to the paper How cheap talk in climate disclosures relates to climate initiatives, corporate emissions, and reputation risk.

Using natural-language processing, the academics went through the annual reports of some 15,000 companies included in the MSCI World index, published between 2010 and 2020.

“A paragraph gets labelled as ‘specific’ if a paragraph contains detailed performance information, details of actions, or tangible and verifiable targets,” the paper explained. “It is labelled as ‘non-specific’ if this is not the case.”

A high proportion of non-specific information – or ‘cheap talk’ – in its climate commitments “indicates that companies are not genuinely committed to significantly reducing greenhouse gas emissions” it argued.

CA100+, SBTi and TCFD

As well as building an index to help stakeholders understand the credibility of companies, the academics explored the impact of CA100+, the Science Based Targets initiative (SBTi) and the Taskforce on Climate-related Financial Disclosures (TCFD) on the disclosure practices of the companies assessed.

“We investigate how these different channels influence companies’ provision of decision-useful information to the public,” they explained, adding that the focus was on the initiatives’ impact on the share of non-specific commitments made in their annual reports.

CA100+ was set up by large investors in 2017, to coordinate their climate engagement with the world’s most polluting listed companies.

There are around 170 firms currently on the network’s list. Each is assigned an investor member of CA100+ to oversee engagement on behalf of the wider group, to make stewardship efforts more efficient, cost-effective and streamlined.

CA100+’s own assessment benchmark, which it publishes each year, has regularly highlighted the slow progress companies have made on aligning with its requirements so far.


“We exploit the fact that being a CA100+ focus company is like an interaction variable between institutional ownership and climate-related engagement,” the study said.

It concluded that, while membership to voluntary initiatives like SBTi corresponded with higher levels of ‘cheap talk’ by companies, the opposite was true for firms that were involuntarily included on the engagement list for CA100+.

They said the findings “strongly confirmed” the hypothesis that “active institutional ownership with targeted engagement strategies through the CA100+ initiative exhibits a statistically significant negative relationship with cheap talk”.

The research also highlighted the lack of penalties companies with high levels of ‘cheap talk’ faced from the financial markets, with the authors calling for stronger regulation to discourage the reliance on voluntary commitments.

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