Using a novel dataset of firms' manual editing of climate-related information, we test the theory that firms strategically (value-optimizing) posture towards a transition or status quo economy, drawing inspiration from Roy (1951)-where the best fishers fish, and the best hunters hunt. Based on a Gordon growth model (Gordon & Shapiro, 1956) interpretation, firms reinforcing their position in the status quo economy should focus any climate efforts on cost efficiencies, and firms finding new competitive advantages should focus on transition growth opportunities. Empirically, we use a simultaneous regressed confirmatory factor analysis (CFA) following Heckman et al. (2006), where retained earnings and future M&A activity are indicators of transition climate postures. In the CFA framework, we test whether the common correlation among transition posture indicators that maximally load on the confirmatory variable of manual editing of climate-related information predict stock returns at the twoweek interval following the editing. We find a 1.6% positive revaluation in the industrials and basic materials sector, and a 2.5% positive revaluation in the energy sector, but a negative 2.0% revaluation in mining and metals when firms position themselves strategically toward transition opportunities. We estimate strategic postures toward the status quo economy using measures of dividends, share repurchases, and cost efficiencies, but fail to find that such postures are value-relevant. All our transition opportunity results are more pronounced for jurisdictions with an OECD environmental policy stringency index score at the middle level (U.S.) or lower, suggesting that corporate climate postures are value enhancing where regulators intervene less. Finally, we consider alternative explanations for these corporate climate transition and status quo postures such as agency, investor demand and litigation fears but do not observe any evidence to support these.

Cauthorn, T.: Climate Transition vs Status Quo: Evidence from Latent Corporate Strategies, C.r.e.d.i.t 2024, Oktober, 2024, Venice, Italy (Sustainable Finance, Co-Authors: Drempetic, S., Hoepner, A., Klein, C. und Morse, A.). dx.doi.org/10.2139/ssrn.4684234