Fine-tuning ClimateBert transformer with ClimaText for the disclosure analysis of climate-related financial risks

Abstract

In recent years there has been a growing demand from financial agents, especially from particular and institutional investors, for companies to report on climate-related financial risks. A vast amount of information, in text format, can be expected to be disclosed in the short term by firms in order to identify these types of risks in their financial and non financial reports, particularly in response to the growing regulation that is being passed on the matter. To this end, this paper applies state-of-the-art NLP techniques to achieve the detection of climate change in text corpora. We use transfer learning to fine-tune two transformer models, BERT and ClimateBert -a recently published DistillRoBERTa-based model that has been specifically tailored for climate text classification-. These two algorithms are based on the transformer architecture which enables learning the contextual relationships between words in a text. We carry out the fine-tuning process of both models on the novel Clima-Text database, consisting of data collected from Wikipedia, 10K Files Reports and web-based claims. Our text classification model obtained from the ClimateBert fine-tuning process on ClimaText, outperforms the models created with BERT and the current state-of-the-art transformer in this particular problem. Our study is the first one to implement on the ClimaText database the recently published ClimateBert algorithm. Based on our results, it can be said that ClimateBert fine-tuned on ClimaText is an outstanding tool within the NLP pre-trained transformer models that may and should be used by investors, institutional agents and companies themselves to monitor the disclosure of climate risk in financial reports. In addition, our transfer learning methodology is cheap in computational terms, thus allowing any organization to perform it.