The Corporate ESG News That Matter

    Stockholm (NordSIP) – According to new research by George Serafeim and Aaron Yoon published by the Harvard Business School, investors can distinguish between news that are likely and those that are unlikely to affect a company’s fundamentals. The authors find that investment decisions are motivated by a financial rather than nonpecuniary incentives.

    Data and methodology

    The authors examine whether and how investors react to different types of ESG news using data more recent and considerably larger than that of previous studies. The sample data used includes 111,020 unique firm–day observations for 3,126 companies with ESG news between January 2010 and June 2018.

    The data is taken from TruValue Labs (TVL), which tracks daily ESG-related information. This dataset includes vetted, reputable, and credible information from analyst reports, media, advocacy groups, and government regulators not from the companies’ press releases.

    The research uses classifications from the Sustainability Accounting Standards Board (SASB) to distinguish the materiality of the news. The model considers the relation between ESG performance scores and future ESG news to isolate the unexpected component of ESG news.


    “The analysis shows that prices react only to issues identified as financially material for a given industry by sustainability accounting standards, and the reaction is larger for news that is positive, receive more attention, and that is related to social capital issues,” the authors explain.

    The study’s main finding is that investors respond selectively to news based on the observation that stock prices only react to the ESG news considered financially material by SASB, suggesting that. The price reaction is larger for positive ESG news.

    The study also finds that a firms’ ESG performance score is predictive of future ESG news. Lastly, “unexpected news is associated with significant stock-price reactions and that this phenomenon is driven mostly by social-capital issues.”

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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