What ESG news matters most to markets?
Research shows investors react positively to positive ESG news, and they react much more strongly for positive than negative news
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STOCK prices react only to financially material environmental, social and governance (ESG) news – and more so when the news is positive, receives more media coverage, and relates to social capital issues.
That’s the conclusion of research I conducted with George Serafeim. We also find that based on the response to news that was likely to affect a company’s fundamentals, ESG investors are motivated by financial rather than non-pecuniary factors.
Past research
Previous studies by Philipp Kruger and Gunther Capelle-Blancard and Aurelien Petit, for example, concluded that the market responds negatively to both positive and negative ESG news. However, which specific ESG news most moves the market is unclear, as is whether any prior evidence would be generalisable today.
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