Firm-Level Green Innovation Beyond Patents

This paper introduces a novel firm-level green innovation measure using ClimateBERT and GPT-3 to analyze earnings call transcripts. The measure captures a broader range of innovative activities beyond patents and distinguishes between invention and adoption dimensions of such efforts. These dimensions reveal distinctive geographical and industry patterns as well as key determinants. Firms engaged in green innovation, including many from carbon-intensive sectors, exhibit lower expected returns than their industry peers, likely due to improved environmental performance and ability to hedge against transition risk. The effects extend to non-patentable inventions and the widespread adoption of green innovations.