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Public Sentiment and the Price of Corporate Sustainability

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  • George Serafeim

Abstract

Combining environmental, social, and governance (ESG) data with “big data” measuring public sentiment about corporate sustainability performance, I found that the valuation premium for strong sustainability performance increases as a function of positive momentum in public sentiment. An ESG factor long (short) on companies with superior (inferior) sustainability performance and negative (positive) ESG sentiment momentum delivered significant positive alpha. In contrast, the high-sentiment ESG factor delivered insignificant alpha and was negatively correlated with the value factor. The evidence suggests that public sentiment influences investor views about the value of sustainability activities and that big ESG data can be useful in identifying “value” ESG stocks.Disclosure: The author is an academic partner at State Street Associates conducting research on ESG issues and sits on the advisory board of investment organizations that use ESG data. Editor’s Note: Submitted 29 Sep 2019accepted 23 Jan 2020 by Stephen J. Brown.

Suggested Citation

  • George Serafeim, 2020. "Public Sentiment and the Price of Corporate Sustainability," Financial Analysts Journal, Taylor & Francis Journals, vol. 76(2), pages 26-46, April.
    • Handle: RePEc:taf:ufajxx:v:76:y:2020:i:2:p:26-46
    DOI: 10.1080/0015198X.2020.1723390
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    Cited by:

    1. Foglia, Matteo & Miglietta, Federica, 2024. "Does every cloud (bubble) have a silver lining? An investigation of ESG financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    2. Antonios Persakis, 2024. "The impact of climate policy uncertainty on ESG performance, carbon emission intensity and firm performance: evidence from Fortune 1000 firms," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(9), pages 24031-24081, September.
    3. Christophe, Stephen E. & Hsieh, Jim & Lee, Hun, 2024. "Reputation and recency: How do aggressive short sellers assess ESG-Related Information?," Journal of Business Research, Elsevier, vol. 180(C).

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