Tracking business opportunities for climate solutions using AI in regulated accounting reports

Abstract

The transition to a low-carbon economy offers substantial business opportunities, yet most research focuses on risks. This study develops a metric to identify firms advancing “climate solutions” by applying large language models to 39,710 10-K filings from 4,483 U.S. firms (2005-2022). The metric reveals a rising emphasis on climate solutions, validated by its responsiveness to policy shocks (e.g., Inflation Reduction Act) and correlation with green revenues and innovation indicators. We apply the measure to three inquiries: (i) firms engaged in climate solutions experience higher revenue growth, especially in sectors with strong intellectual property protection and technologies with high abatement potential; (ii) a modest political divide exists, with firms located in states with predominantly Republican voting patterns exhibiting lower climate solutions—a gap that narrows for low-cost technologies; and (iii) seemingly unrelated industries converge around shared technologies, reflected in higher stock return synchronicity. These results illustrate the value of AI-based analysis of regulatory filings for uncovering climate-related business opportunities.