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Environmental, social and governance reporting in annual reports: A textual analysis

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  • Philipp Baier
  • Marc Berninger
  • Florian Kiesel

Abstract

Considering environmental, social, and governance (ESG) factors becomes increasingly important for companies and investors. However, “ESG” is not clearly defined so far and, therefore, it is difficult to measure the ESG activity of companies. We analyze the extent and changes in 10‐K reports and proxy statements on ESG, using a textual analysis and creating an ESG dictionary. The results show an average of 4.0 % ESG words on total words in the reports. The ESG word list with 482 items can be used to quantitatively examine the extent of ESG reporting, which will be helpful especially for SRI investors. Our classification of 40 subcategories allows a highly granular analysis of different ESG related aspects. Moreover, indications for a relation between changes in reporting and real events, especially negative media presence, are detected. Regulatory bodies have to be aware of the use of such words and how they are used.

Suggested Citation

  • Philipp Baier & Marc Berninger & Florian Kiesel, 2020. "Environmental, social and governance reporting in annual reports: A textual analysis," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 29(3), pages 93-118, August.
    • Handle: RePEc:wly:finmar:v:29:y:2020:i:3:p:93-118
    DOI: 10.1111/fmii.12132
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    2. Konstantin Ignatov & Markus Rudolf, 2023. "Sentimental Sustainability: Does What Companies Say Tell More Than What Companies Do?," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 32(4), pages 221-252, November.
    3. Li, Chao & Keeley, Alexander Ryota & Takeda, Shutaro & Seki, Daikichi & Managi, Shunsuke, 2024. "ESG Tendencies from News - Investigated by AI Trained by Human Intelligence," MPRA Paper 122757, University Library of Munich, Germany.
    4. Lennart Ante & Aman Saggu, 2025. "Quantifying A Firm's AI Engagement: Constructing Objective, Data-Driven, AI Stock Indices Using 10-K Filings," Papers 2501.01763, arXiv.org.
    5. Ferjančič, Urša & Ichev, Riste & Lončarski, Igor & Montariol, Syrielle & Pelicon, Andraž & Pollak, Senja & Sitar Šuštar, Katarina & Toman, Aleš & Valentinčič, Aljoša & Žnidaršič, Martin, 2024. "Textual analysis of corporate sustainability reporting and corporate ESG scores," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    6. Ying Wang & Mingsheng Li & Amina Kamar, 2022. "Environmental Concerns and Impression Offsetting: New Evidence on Dividend Payout," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 31(2-3), pages 87-118, July.
    7. Li, Chao & Keeley, Alexander Ryota & Takeda, Shutaro & Seki, Daikichi & Managi, Shunsuke, 2024. "Investor’s ESG Tendency Probed by Pre-trained Transformers," MPRA Paper 122756, University Library of Munich, Germany.

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