Firm-Level Green Innovation Beyond Patents

The authors Prof. Markus Leippold and Dr. Tingyu Yu take a look beyond patents to capture how companies develop and adopt green technologies.

How can we measure whether companies are actually engaging in green innovation?

Patents are one of the most widely used indicators, but they capture only part of the innovation process. Many environmentally relevant innovations are not patented, while the implementation of existing technologies can be just as important for achieving environmental improvements. 

In Firm-Level Green Innovation Beyond Patents, the authors develop a firm-level measure that captures a broader spectrum of corporate green innovation. In particular, the study distinguishes between green invention, meaning the development of new technologies or strategies, and green adoption, meaning the integration of existing technologies into business operations. 

The authors analyze corporate earnings-call transcripts and use natural language processing to identify discussions related to green innovation. Their approach combines ClimateBERT with GPT-based processing of green patent abstracts to train models that identify six areas of green innovation and distinguish between invention and adoption. The resulting measure captures the proportion of a firm's earnings-call discussion devoted to green innovation. 

The analysis covers nearly 290,000 quarterly earnings calls and approximately 50,000 firm-year observations. The authors compare the text-based measure with conventional patent measures and examine its relationship with corporate characteristics, climate regulation and stock returns. 

1. Green innovation extends well beyond patents. The text-based measure identifies substantial green innovation activity among firms without green patents. This is particularly pronounced for adoption. In the Utilities sector, for example, 74% of observations discuss green innovation adoption, with most coming from firms without green patents. In Coal, 39% of observations discuss adoption, despite none involving green patents. 
2. Invention and adoption follow different patterns. Green invention is concentrated in technological and research-intensive locations, while adoption is more geographically dispersed. The distinction is also visible across industries: Electrical Equipment and Automobiles are prominent in invention, whereas carbon-intensive sectors such as Utilities and Metal Mining show substantial adoption activity. 
3. Green innovation is reflected in financial markets. Firms with greater green innovation discussion tend to have lower expected stock returns than industry peers. A portfolio of firms with low green innovation relative to firms with high green innovation generates an average annual return spread of 5.4%. The authors interpret the negative return relationship as consistent with green innovation helping firms hedge against transition risk and improve environmental performance. 

Importantly, both invention and adoption are priced in the stock market even after accounting for green patents. The effects of adoption also extend to non-patenting firms, suggesting that conventional patent-based measures can miss economically and environmentally relevant innovation activity. 

The findings suggest that patents alone provide an incomplete picture of corporate green innovation. In particular, firms can contribute to the diffusion and implementation of green technologies without necessarily developing or patenting those technologies themselves. 

For researchers and investors, this highlights the importance of distinguishing between creating green technologies and putting them into practice. For firms in carbon-intensive industries, the results also indicate that adopting existing technologies can form an important part of their response to climate-related transition pressures. 

More broadly, the study shows that measuring corporate climate strategies requires looking beyond traditional innovation indicators and considering how technologies are actually adopted and integrated into business activities. 

More information:

• Leippold, M., & Yu, T. (2026). Firm-Level Green Innovation Beyond Patents. Review of Finance, 30, 423–458. https://doi.org/10.1093/rof/rfaf058