Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Public Sentiment and the Price of Corporate Sustainability
      29 Oct 2018Working Paper Summaries

      Public Sentiment and the Price of Corporate Sustainability

      by George Serafeim
      Public opinions from industry experts are important in the economy but it has not been clear how they affect the valuation of and returns to corporate activities. Using big data and machine learning, this paper analyzes how public sentiment influences the market pricing of firms’ sustainability activities and thereby the future stock returns of portfolios that integrate environmental, social, and governance data.
      LinkedIn
      Email

      Author Abstract

      Combining corporate sustainability performance scores based on environmental, social, and governance (ESG) data with big data measuring public sentiment about a company’s sustainability performance, I find that the valuation premium paid for companies with strong sustainability performance has increased over time and that the premium is increasing as a function of positive public sentiment momentum. An ESG factor going long on firms with superior or increasing sustainability performance and negative sentiment momentum and short on firms with inferior or decreasing sustainability performance and positive sentiment momentum delivers significant positive alpha. This low sentiment ESG factor is uncorrelated with other factors, such as value, momentum, size, profitability, and investment. In contrast, the high sentiment ESG factor delivers insignificant alpha and is strongly negatively correlated with the value factor. The evidence suggests that public sentiment influences investor views about the value of corporate sustainability activities and thereby both the price paid for corporate sustainability and the investment returns of portfolios that consider ESG data.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: October 2018
      • HBS Working Paper Number: HBS Working Paper #19-044
      • Faculty Unit(s): Accounting and Management
        Trending
          • 29 Oct 2020
          • Research & Ideas

          The COVID Gender Gap: Why Fewer Women Are Dying

          • 13 Jul 2020
          • Research & Ideas

          Merck CEO Ken Frazier Discusses a COVID Cure, Racism, and Why Leaders Need to Walk the Talk

          • 11 Jan 2021
          • Research & Ideas

          Is A/B Testing Effective? Evidence from 35,000 Startups

          • 17 Feb 2020
          • Sharpening Your Skills

          How Entrepreneurs Can Find the Right Problem to Solve

          • 13 Jan 2021
          • Research & Ideas

          How 'Small C' Change Can Beat Large-Scale Rebuilding

      George Serafeim
      George Serafeim
      Charles M. Williams Professor of Business Administration
      Contact
      Send an email
      → More Articles
      Find Related Articles
      • Environmental Sustainability
      • Investment Return
      • Corporate Social Responsibility and Impact

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College