Green Pledges and the Pricing of Climate Risks in Financial Markets

• Applicant: Professor Dr. Ole Wilms
• Subject Area: Economic Policy, Applied Economics
• Term: since 2022
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 509502478

This project investigates corporate decarbonization commitments—so-called corporate green pledges—with a focus on the determinants of such commitments, the financial market reaction, as well as the credibility and real effects of such announcements. The research builds on a novel dataset developed in the first funding phase, combining firm-level climate news, financial data, and environmental performance metrics. The second phase delivers new insights on corporate green pledges through four interconnected workstreams: (1) comparing and refining LLMs to extract detailed information from unstructured corporate disclosures; (2) analyzing how the specificity of green pledges influences investor reactions and distinguishes credible commitments from greenwashing; (3) studying how markets respond when firms fail to meet or abandon pledges; and (4) examining how ownership structures and investor mandates affect a firm’s likelihood to issue such pledges. By combining text analysis, event studies, and causal inference methods, the project provides new insights into the credibility and pricing of climate-related commitments. The project offers significant policy relevance by providing empirical evidence on how financial markets distinguish between credible climate commitments and symbolic greenwashing. As regulators and standard-setting bodies—such as the EU (CSRD) or the ISSB—move toward stricter sustainability disclosure requirements, this research directly informs the design of effective and enforceable reporting standards. By identifying which attributes of green pledges are valued by investors and how markets respond to failed commitments, the findings support the development of transparency and accountability mechanisms critical to achieving national and international climate targets. Furthermore, insights into how ownership structures and investor mandates influence corporate climate strategies offer practical guidance for designing market-based instruments that align private sector behavior with public climate objectives.

• DFG Programme: Research Grants
• International Connection: USA
• Cooperation Partner: Professor Michael D. Bauer, Ph.D.