["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nWe examine how the prominence and tone of climate risk disclosures affect firm value and strategic climate positioning for large European nonfinancial companies. We developed a firm‐level climate risk exposure (CRE) index that assesses climate risks within corporate narratives across four EU categories: transition risk, physical risk, emissions, and pollution. Our findings show two main insights. First, higher CRE correlates with lower market valuations (market‐to‐book ratios and Tobin's Q), indicating that investors consider factors like compliance costs and potential liabilities. Second, the tone of disclosures is crucial. A positive tone can mitigate negative impacts, suggesting that credible communication can shift investor focus to preparedness and innovation. However, companies that overstate their climate efforts compared with actual practices face valuation penalties, while increased disclosure is generally seen as positive, indicating improved alignment between commitments and actions. Additionally, the introduction of the Sustainable Finance Disclosure Regulation (SFDR) shows that early high‐disclosure firms experience less negative repricing than those that disclose later. Overall, content salience, tone, and alignment between statements and actions collectively design market perceptions of firms' climate exposure and commitment to decarbonization. Our findings offer practical insights emphasizing that content salience and tone consistency are crucial for reducing boilerplate language and preventing greenwashing.\n"]