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

Author

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  • Baier, P.
  • Berninger, M.
  • Kiesel, F.

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

  • Baier, P. & Berninger, M. & Kiesel, F., 2020. "Environmental, social and governance reporting in annual reports: A textual analysis," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 120592, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:120592
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/120592/
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    Cited by:

    1. Gallucci, Carmen & Santulli, Rosalia & Lagasio, Valentina, 2022. "The conceptualization of environmental, social and governance risks in portfolio studies A systematic literature review," Socio-Economic Planning Sciences, Elsevier, vol. 84(C).
    2. Nicolas, Maxime L.D. & Desroziers, Adrien & Caccioli, Fabio & Aste, Tomaso, 2024. "ESG reputation risk matters: An event study based on social media data," Finance Research Letters, Elsevier, vol. 59(C).
    3. Mandas, Marco & Lahmar, Oumaima & Piras, Luca & De Lisa, Riccardo, 2024. "ESG reputational risk and market valuation: Evidence from the European banking industry," Research in International Business and Finance, Elsevier, vol. 69(C).
    4. Tim Loughran & Bill McDonald & James R. Otteson, 2023. "How Have Corporate Codes of Ethics Responded to an Era of Increased Scrutiny?," Journal of Business Ethics, Springer, vol. 183(4), pages 1029-1044, April.
    5. Elena Nechita & Cristina Lidia Manea & Elena-Mirela Nichita & Alina-Mihaela Irimescu & Diana Manea, 2020. "Is Financial Information Influencing the Reporting on SDGs? Empirical Evidence from Central and Eastern European Chemical Companies," Sustainability, MDPI, vol. 12(21), pages 1-34, November.
    6. Gonul Colak & Kent Hickman & Timo Korkeamäki & Niclas O. Meyer, 2022. "ESG Issues and Career Prospects of Directors: Evidence from the International Director Labor Market," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 31(4), pages 147-203, November.
    7. Mandas, Marco & Lahmar, Oumaima & Piras, Luca & De Lisa, Riccardo, 2023. "ESG in the financial industry: What matters for rating analysts?," Research in International Business and Finance, Elsevier, vol. 66(C).
    8. Rahimi Mansoor & Shaista & Subhan Ullah & Rovaid Ullah, 2024. "The Impact of ESG on Financial Performance of Top 100 Companies of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(3), pages 14-20.
    9. Bazrafshan, Ebrahim, 2023. "The role of ESG ranking in retail and institutional investors' attention and trading behavior," Finance Research Letters, Elsevier, vol. 58(PC).
    10. Diana Barro & Marco Corazza & Gianni Filograsso, 2023. "A ESG rating model for European SMEs using multi-criteria decision aiding," Working Papers 2023: 27, Department of Economics, University of Venice "Ca' Foscari".
    11. Ignatov, Konstantin, 2023. "When ESG talks: ESG tone of 10-K reports and its significance to stock markets," International Review of Financial Analysis, Elsevier, vol. 89(C).
    12. Maxime L. D. Nicolas & Adrien Desroziers & Fabio Caccioli & Tomaso Aste, 2023. "ESG Reputation Risk Matters: An Event Study Based on Social Media Data," Papers 2307.11571, arXiv.org.
    13. Kyriaki Kosmidou & Dimitrios Kousenidis & Anestis Ladas & Christos Negkakis, 2024. "Climate‐related performance and stock price crash risk," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 33(2), pages 113-148, May.
    14. Latino, Carmelo, 2023. "Surfing the green wave: What's in a "green" name change?," SAFE Working Paper Series 410, Leibniz Institute for Financial Research SAFE.

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