Effective communication in the policy space
In this paper, D’Acunto et al. focus on a central bank’s ability to manage consumers’ macroeconomic expectations and test whether more diverse policy bodies might be more trusted by underrepresented consumers and hence influence their expectations more effectively. The authors designed an information-treatment randomized control trial (RCT) on a representative population of more than 9,000 US consumers. The RCT varies randomly the salience of existing diversity representation on the FOMC and directly shows that this intervention makes treated survey participants update their perceived diversity of the FOMC upward.
We find women and Black consumers are more likely to incorporate the same FOMC forecast in their subjective expectations when the presence of a female or a Black policymaker on the FOMC is made salient relative to when it is not. They also become more trustful in the Fed and are more willing to actively acquire information about monetary policy when it is associated with a diverse policymaker. White men, instead, incorporate FOMC forecasts similarly irrespective of whether FOMC diversity representation is made salient.
As of 2022, the Federal Reserve Board of Governors has become more diverse, with 4 women serving on the 7-member Board. However, the Federal Reserve Bank presidents are less diverse, with only 2 women and 1 Black president out of 12 regional banks. The authors argue that greater diversity is important to increase the effectiveness of communication in terms of influencing white female and black individuals’ macroeconomic expectations.
A Diverse Fed Can Reach Underrepresented Groups
Authors: Francesco D’Acunto, Andreas Fuster, Michael Weber
From: Boston College, Swiss Finance Institute, University of Chicago
Communication in the corporate space
Chalmers and Klinger-Vidra analyze how companies communicate their sustainability initiatives. They use natural language processing (NLP) methods on a database of more than 6500 corporate sustainability reports written by 320 of the world’s largest (based on market capitalization) and “most admired” firms (based on two reputational indices, namely Dow Jones S&P Sustainability Index and Fortune’s Global Most Admired Companies). These firms are located in seven major world regions: Africa, Asia, Europe, the Middle East, North America, Oceania, and South America. The authors find:
- Lexical inconsistency in sustainability reports, where the same terminology is not used consistently to refer to concepts, can undermine credibility and transparency. This inconsistency raises suspicions of ‘greenwashing’ i.e. exaggerating sustainability efforts without substantive action. It makes reports harder to comprehend.
- Analysis of sustainability reports over time shows growing lexical inconsistency, with a spike from 2019-2021. This could reflect companies struggling to respond to emerging complexities around sustainability. There is variation globally – the US, Australia, and some European countries have the most consistent language in reports. Companies in South America have high inconsistency.
- The authors argue that clear, consistent language is important for building trust and avoiding backlash against sustainability initiatives. Companies should focus on aligning terminology in sustainability communications over time and across regions.
Inconsistent language can undermine the credibility of corporate social responsibility reports
Authors: Adam William Chalmers, Robyn Klingler-Vidra
From: University of Edinburgh, King’s College London
