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“Big data” measuring public sentiment about corporate sustainability performance can be useful in identifying “value” ESG (environmental, social, and governance) stocks.


Overview

Combining environmental, social, and governance (ESG) data with “big data” measuring public sentiment about corporate sustainability performance, I found that the valuation premium for strong sustainability performance increases as a function of positive momentum in public sentiment. An ESG factor long (short) on companies with superior (inferior) sustainability performance and negative (positive) ESG sentiment momentum delivered significant positive alpha. In contrast, the high-sentiment ESG factor delivered insignificant alpha and was negatively correlated with the value factor. The evidence suggests that public sentiment influences investor views about the value of sustainability activities and that big ESG data can be useful in identifying “value” ESG stocks.

About the Author(s)

George Serafeim

George Serafeim is the Charles M. Williams Professor of Business Administration at Harvard Business School, Boston, Massachusetts.

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