Business photo created by -
Author picture

Do positive ESG news cause positive market reactions?

This week I want to highlight an academic paper written by George Serafeim (from Harvard Business School) and Aaron Yoon (from Kellogg at Northwestern University) on whether positive ESG news cause positive market reactions.

This line sums the paper’s conclusions up quite well: “Investors differentiate in their reactions based on whether the news is likely to affect a company’s fundamentals, and therefore their reactions are motivated by a financial rather than a nonpecuniary motive.”

The authors analyzed price data for over 3000 stocks in the period that covers 2010 to 2018 and combined it with AI data from Truvalue Labs. They estimated the daily market adjusted return for the 5 days leading up to and after an ESG event (defined as when ESG news were published). We think the paper is worth reading in full, but here are 5 interesting highlights:


  1. Not all ESG news are associated with price reactions.
  2. Positive news on topics defined as material for the industry the company is in (using SASB’s materiality map) generate on average a price reaction of 60bps the first day and 75bps the first two days after the news release.
  3. These results are even more statistically significant (218 bps the first day) if news were covered by more than 5 news outlets on their release.
  4. News related to “social capital” (defined as the impact organizations have on their customers due to their products’ safety, quality, affordability, and/or access) generate the strongest reactions (187bps the first day, 241bps the first three days).
  5. Bad news related to natural capital (defined as the impact organizations have on the environment) generated price falls, but positive news didn’t generate a significant reaction.


Prior research on how stocks react to ESG news has had different results (see example 1example 2), but this paper has a much bigger database which uses artificial intelligence to sort news and consider many more news outlets, which would make the results more statistically significant. Furthermore, interest in ESG has obviously increased significantly in recent times which was not necessarily reflected in previous academic work.

Our main takeaway from this paper is that, as suspected, investors are definitely reacting to ESG information companies release, but they will only do so if information is truly material to the organization. This is another reason why understanding which topics are material for your organization must be the first step in designing an ESG strategy and communicating on it. It is also why revisiting materiality over time will guarantee that your strategy truly reflects your organization’s current material topics and benefits from your sustainability efforts. If you have any questions on how this can be done, do reach out as we would be happy to help.


I hope you found this interesting. As usual, if there is anything we can help you with, please let us know.



CEO, Miranda ESG

Contacts at Miranda Partners

Damian Fraser
Miranda Partners

Marimar Torreblanca
Miranda ESG