Rotman School of Management, Canada

“If Not Certain Be Vague”: How Uncertainty about Investors’ Preferences Shapes Voluntary Climate-Change Disclosure

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ABSTRACT

We investigate the role of uncertainty about investors’ preferences in voluntary climate change-related disclosure. We examine whether firms choose to remain silent and vague to mitigate potential dissatisfaction among investors when uncertain of how the voluntary disclosure will be perceived. We provide evidence that uncertainty about investors’ environmental preferences is positively related to silence and vagueness in climate-change disclosure using both dictionary-based and ClimateBert-based measures. Moreover, we show that companies with extreme environmental performance are more silent and vague in their disclosure when facing uncertain institutional investors’ preferences. Additional analyses show that a dispersed general opinion about corporate efforts toward climate change is positively associated with silence and vagueness. Finally, the level of silence and vagueness in the previous year is positively associated with analysts’ climate-change interest during Q&A sessions of earnings calls. Overall, the paper sheds light on a potential explanation for the increasing levels of boilerplate ESG disclosure.

BIOGRAPHY

Giulia Sargiacomo is a Ph.D. student in Accounting at the Rotman School of Management, University of Toronto. Her research interests focus on corporate disclosure practices in the Corporate Social Responsibility (CSR) space, with an emphasis on topics related to climate change. Giulia aims to assess the effectiveness of CSR initiatives, foster informed discussion, and support policy making. Before joining the Ph.D. program, she worked as a research assistant for the Accounting department at Bocconi University and as a Financial Controller with a focus on CSR activities in the luxury industry. She earned a B.Sc. and M.Sc. degrees from Bocconi University.