Do sustainable company stock prices increase with ESG scrutiny? Evidence using social media

by Emilie Kvam, Peter Molnar, Ingvild Wankel and Bernt Arne Ødegaard

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