The Irrelevance of ESG Disclosure to Retail Investors: Evidence from Robinhood

Abstract

Using an hourly dataset on retail investor individual security positions from Robinhood Markets, we find that ESG disclosures do not inform retail investors’ buy and sell decisions. The response to ESG press releases by retail investors is no different than the routine portfolio adjustments that occur on non-event days. In contrast, these same investors make economically meaningful changes to their portfolios in response to non-ESG press releases, especially those that cover earnings announcements. Our findings are not due to a lack of statistical power or other data shortcomings. We also conduct additional analyses which suggest that our results are not due to a lack of economic content, a lack of visibility, or difficulty in integrating information from ESG press releases into investment decisions. Our evidence may be helpful to regulators that are considering how ESG information should be disclosed to capital market participants.

Keywords: ESG, Retail Investors, Corporate Social Responsibility

JEL Classification: M41, D83, G14, G32, G34