How Does ESG Shape Consumption?

We examine how ESG controversies ripple through the product market and shape consumption. We show that sales of affected products drop by 5–10%, compared to unaffected products consumed by the same household. The contraction is demand-driven, with price adjustments trailing quantity decreases by 1-2 months. Across socio-economic demographics, results are strongest in Democrat-leaning counties and among wealthy millennials, but weakest among equally wealthy baby boomers. Salience about natural disasters, product types, and issues underlying the ESG shocks also heterogeneously affect the response. In summary, we present the first household-level evidence on the financial materiality of ESG, via the consumption channel.

Keywords: ESG, product market, consumption

JEL Classification: G50, M14, E20, D10

Suggested Citation: Suggested Citation

Houston, Joel F. and Lin, Chen and Shan, Hongyu and Shen, Mo, How Does ESG Shape Consumption? (October 1, 2022). HKU Jockey Club Enterprise Sustainability Global Research Institute - Archive, Available at SSRN: https://ssrn.com/abstract=4243071 or http://dx.doi.org/10.2139/ssrn.4243071