Exploiting the unique features of the CDP, the world-leading platform of corporate climate risk disclosures, we study the relationship between institutional investors' demand for climate-related information (as reflected in their CDP signatory status), firms' decision to disclose this information, and corporate carbon emissions. We provide systematic international evidence that ownership by CDP signatories is positively associated with the probability of disclosing information to the CDP, and that such disclosure is associated with subsequent lower carbon emissions. We also observe that CDP signatories are more likely to engage with and divest from top emitters disclosing to the CDP. Overall, these results are consistent with the notion that investor demand for climate-related information results in greater corporate disclosure and contributes to firms’ decisions to lower future carbon emissions.

This paper summarizes and discusses Cohen et al. (2023), including how their results fit into a larger set of open questions about how sustainability-oriented information gets used in capital markets. Two key messages emerge. The first is that investors are not a monolith. The second message is that the information environment in which investors have been operating has changed dramatically over the past two decades and is likely to continue to evolve for the foreseeable future. Both messages have important implications for researchers when thinking about how to design empirical tests of theoretical relationships.