Environmental, Social and Governance Reporting in Annual Reports: A Textual Analysis

Financial Markets, Institutions & Instruments, Forthcoming

Posted: 24 Jul 2018 Last revised: 10 Sep 2020

See all articles by Philipp Baier

Philipp Baier

Darmstadt University of Technology

Marc Berninger

Darmstadt University of Technology

Florian Kiesel

Grenoble Ecole de Management

Date Written: March 12, 2020

Abstract

Considering environmental, social, and governance (ESG) factors becomes increasingly important for companies and investors. However, ESG is not clearly defined so far and, therefore, it is difficult to measure the ESG activity of companies. We analyze the extent and changes in 10-K reports and proxy statements on ESG, using a textual analysis and creating an ESG dictionary. The results show an average of 4.0 % ESG words on total words in the reports. The ESG word list with 482 items can be used to quantitatively examine the extent of ESG reporting, which will be helpful especially for SRI investors. Our classification of 40 subcategories allows a highly granular analysis of different ESG related aspects. Moreover, indications for a relation between changes in reporting and real events, especially negative media presence, are detected. Regulatory bodies have to be aware of the use of such words and how they are used.

Keywords: Environment, Social, Governance, ESG, Content analysis, Investor communication, Textual analysis, Sustainability measurement

JEL Classification: C80, G30, K32, Q01, Q58

Suggested Citation

Baier, Philipp and Berninger, Marc and Kiesel, Florian, Environmental, Social and Governance Reporting in Annual Reports: A Textual Analysis (March 12, 2020). Financial Markets, Institutions & Instruments, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3206751 or http://dx.doi.org/10.2139/ssrn.3206751

Philipp Baier

Darmstadt University of Technology ( email )

Universitaets- und Landesbibliothek Darmstadt
Magdalenenstrasse 8
Darmstadt, Hesse D-64289
Germany

Marc Berninger

Darmstadt University of Technology ( email )

Hochschulstra├če 1
Darmstadt, Hesse D-64289
Germany

Florian Kiesel (Contact Author)

Grenoble Ecole de Management ( email )

12 Rue Pierre Semard
Grenoble, Cedex 01 38000
France

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