July 2023
We study the links between short-term stock returns and ESG (Environmental, Social and Governance) concerns. The ESG concerns are measured by ESG-related sentiment extracted from Google Trends and Twitter. Companies with high ESG scores deliver high short-term returns in times of heightened ESG concerns, measured both using heightened social media interest in ESG (both at the company and economy-wide level), and economic uncertainty(measured by the VIX index). Our results are consistent with Cornell~(2020)'s arguments of increased short-term demand for high-quality ESG stocks at times when ESG concerns come to the forefront. On average short-term returns are decreasing in ESG rankings, consistent with the implications of equilibrium models of Pastor et al. (2021) and Pedersen et al. (2021).
Keywords: ESG (Environmental, Social, Governance) concerns; Social Media; Stock Returns
JEL Codes: G10; G20
The paper at SSRN