Greenwashing in Earnings Conference Calls

We examine the presence, use, and consequences of corporate greenwashing in earnings conference calls for a large sample of U.S. firms from 2008 to 2022. We develop a measure of greenwashing as the absolute difference between the actual and a model-based expected level of climate change discussions by management. To validate our proxy, we show that the abnormal (greenwashing) component does not convey material information about concurrent and future environmental performance, while the predicted component does. Greenwashing is widespread, has increased over time, and responds to reporting incentives such as high-profile environmental scandals and disasters. When it comes to potential benefits, we find that capital markets do not price greenwashing, consistent with investors not being fooled by this overly optimistic communication. However, we do find near-term reputational benefits of greenwashing in the form of a more positive sentiment towards the firm as expressed in environmental ratings, news articles, blog entries, and social media posts. Our results suggest that corporate greenwashing may be less aimed at capital markets but rather at other important stakeholders beyond investors.