Skills and Sentiment in Sustainable Investing
58 Pages Posted: 2 Mar 2020 Last revised: 28 Apr 2021
Date Written: February 1, 2020
We document a positive ESG premium among stocks with a low degree of socially-motivated investor ownership. We show that a theory of sustainable investing with heterogeneous skill and sustainability sentiment can explain this finding. In support of this explanation, we find in the cross-section that a low degree of socially-motivated ownership leads to future ESG score increases. The premium amongst low degree of socially-motivated ownership is stronger during periods of high climate sentiment and risk aversion as in the crisis.
Keywords: Heterogenous Investors, Revealed Preferences, ESG, Sentiment, Text Data
JEL Classification: G11, G12, G14, Q5
Suggested Citation: Suggested Citation