Do CEOs' Political Ideologies matter for Climate Disclosures?

This paper investigates whether the political ideologies of chief executive officers (CEOs) influence their firms’ narrative climate disclosures, drawing on upper echelons theory. We hand-collect data on CEOs’ political contributions in the U.S. and build a measure of political ideology. We find that firms managed by Democrat CEOs provide more specific climate-related disclosures than their Republican peers. Following a natural disaster, Democratic-leaning firms increase the specificity of climate disclosures in their reporting. Further, firms led by Democrat CEOs show more pessimistic climate disclosures following President Trump’s withdrawal from the Paris Agreement. The relation between Democrat-led firms and climate disclosure specificity is stronger in firms where CEOs have high managerial discretion. Our findings are robust to alternative disclosure specificity and commitment measures using the ClimateBert deep learning model and the use of a difference-in-differences analysis around CEO turnover to mitigate endogeneity concerns. Finally, we find that firms with Democrat CEOs are associated with lower carbon emissions. Taken together, our findings suggest that political ideologies permeate into corporate climate change risk disclosures and translate into real effects in managing climate risk. Our research underlines the importance of finding a consensus between politicians and corporations to reduce U.S. climate divisiveness and reach the net zero objective.