A1403
Title: Semantic weighting of climate solutions and their impact on sustainable profitability of firms
Authors: Yanchen Liu - Universidad Complutense de Madrid (Spain) [presenting]
Abstract: Using a semantically weighted measure of climate solutions constructed from the business description sections of the 10-K filings of US public firms, its relationship with sustainable profitability is examined. Unlike frequency-based indicators that count the proportion of climate solution sentences but fail to distinguish between substantive and superficial mentions, our approach applies a deep contextualized term weighting model to assign relevance scores, producing an indicator that better captures the quality of climate solution activities. The measure shows stronger correlation with external environmental innovation scores and superior explanatory power in panel regressions relative to the standard proportional indicator. Analyzing profitability outcomes, it is found that high scores on this measure are associated with lower gross margins, higher returns on sales, and a dual effect on return on assets, reflecting both efficiency premiums and overinvestment penalties. Overall, results suggest that semantic weighting enhances the measurement of climate solutions and reveals the nuanced financial implications of climate-related strategies of firms.
