The Irrelevance of ESG Disclosure to Retail Investors
44 Pages Posted: 12 Jun 2020 Last revised: 11 Oct 2024
Date Written: May 19, 2020
Abstract
Using an hourly dataset on retail investor individual security positions from Robinhood Markets, we find no evidence that ESG disclosures inform retail investors’ buy and sell decisions. The response on ESG press release days by retail investors is indistinguishable from 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 pertain to earnings announcements. We use stock return tests to show that there is economic content in ESG press releases, and we conduct subsample analyses showing that retail investors do not respond to the most salient and economically transparent ESG disclosures. Collectively, these tests suggest that a lack of economic content, a lack of visibility, and difficulty with investment integration are unlikely to explain our findings.
Keywords: ESG, Retail Investors, Corporate Social Responsibility
JEL Classification: M41, D83, G14, G32, G34
Suggested Citation: Suggested Citation