Media Attention to Environmental Issues and ESG Investing

21 December 2022DOI: https://doi.org/10.33893/FER.21.4.129

Author information:

Balázs J. Csillag: John von Neumann University, Student. E-mail:

Marcell P. Granát: Magyar Nemzeti Bank, Education and Research Expert; John von Neumann University, Assistant Lecturer. E-mail:

Gábor Neszveda: Magyar Nemzeti Bank, Senior Educational and Research Expert; John von Neumann University; Associate Professor and Deputy Head of MNB Institute. E-mail:

Abstract:

We analyse how ESG scores affect future returns when environmental issues receive higher media coverage. Investors might take environmental aspects into account if they are confronted with the issue of global warming more frequently in the press. We assess the prevalence of environmental issues in the media with a machine learning-based Structural Topic Modelling (STM) methodology, using a news archive published in the USA. Running Fama-MacBeth regressions, we find that in periods when the media actively report on environmental issues, ESG scores have a significant negative impact on future returns, whereas, in months when fewer such articles are published, investors do not take sustainability measures into account, and ESG scores have no explanatory power.

Cite as (APA):

Csillag, B. J., Granát, M. P., & Neszveda, G. (2022). Media Attention to Environmental Issues and ESG Investing. Financial and Economic Review, 21(4), 129–149. https://doi.org/10.33893/FER.21.4.129

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Column:

Study

Journal of Economic Literature (JEL) codes:

C55, G12

Keywords:

ESG, environmental issues, investors’ attention, Structural Topic Model, Fama-MacBeth regression

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