Climate Talk: Differentiating Walkers from Talkers with Climate Bird

Artificial Intelligence Can Help Us Identify Companies That Are Serious About Climate Change

Despite growing awareness of climate change, corporate disclosures often lack transparency and substance. Markus Leippold, a finance professor and former rock climber, believes artificial intelligence (AI) can help separate the "walkers" from the "talkers" – companies that genuinely address climate change from those that engage in empty rhetoric.

Climate Change Is an Economic Problem at Its Root

Climate change is ultimately an economic problem, caused by human economic activities and coordinated through financial markets. Textbook economics assumes perfect information, which is not the case with climate change.

Textbook Economics Assumes Perfect Information, Which Is Not the Case with Climate Change

Textbook economics relies on the "invisible hand" to allocate capital efficiently. However, this requires complete information, which is lacking in the context of climate change. Corporate sustainability reports and initiatives like the Task Force on Climate-related Financial Disclosures (TCFD) aim to address this information gap.

Companies Are Not Walking Their Talk on Climate Change

Despite these initiatives, companies often fail to provide clear and comprehensive climate-related information. Leippold shares anecdotes of a corporate sustainability officer who watered down a sustainability report and a CEO who boasted reduced emissions while ignoring significant scope 3 emissions.

Climate Bird: An AI Tool to Identify Cheap Talkers

To address this issue, Leippold and his team developed Climate Bird, an AI tool based on the BERT algorithm. Climate Bird analyzes corporate communication, identifying vague language and distinguishing between specific commitments and boilerplate. The tool calculates a "cheap talk index" (CTI) to measure the extent of empty promises.

Cheap Talkers Use Climate Initiatives for Image Enhancement

Their research revealed that cheap talkers often support climate initiatives to enhance their public image, rather than making tangible commitments to action.

Cheap Talkers Have Higher Emission Increases

Furthermore, cheap talkers tend to have higher emission increases, using positive rhetoric to conceal their negative environmental impact.

Cheap Talkers Have More Negative Media Attention

Cheap talkers also face more negative media attention due to their involvement in environmental incidents, leading to increased reputation and financial risks.

Words Matter, but They Can Be Deceiving

Leippold emphasizes the importance of language in corporate communication, but warns that words can be deceiving. Climate Bird helps differentiate between genuine commitments and empty promises.

Climate Bird Is Open Source and Available to Everyone

The team has made Climate Bird open source and available on their website, chatclimate.ai. Regulators, investors, stakeholders, and individuals can use the tool to evaluate corporate climate commitments.

We Need Bold Actions and Visionary Ideas to Address Climate Change

Addressing climate change requires bold actions and visionary ideas. Leippold draws inspiration from his climbing experience, highlighting the value of persistence in the face of seemingly impossible challenges.

Artificial Intelligence Offers Immense Potential for Climate Action

Artificial intelligence, like Climate Bird, can help identify companies that are serious about climate change and drive meaningful action.

Conclusion

Climate Bird empowers stakeholders to hold companies accountable for their climate commitments. By separating walkers from talkers, we can ensure that words translate into tangible action, leading to a more sustainable and climate-resilient future.