How Does ESG Shape Consumption?

60 Pages Posted: 18 Oct 2022 Last revised: 27 Mar 2024

See all articles by Joel F. Houston

Joel F. Houston

University of Florida - Department of Finance, Insurance and Real Estate

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Hongyu Shan

Fordham University - Finance Area; China Europe International Business School (CEIBS)

Mo Shen

Harbert College of Business, Auburn University

Date Written: October 1, 2022

Abstract

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

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

Joel F. Houston

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Hongyu Shan (Contact Author)

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

Mo Shen

Harbert College of Business, Auburn University ( email )

405 West Magnolia Ave
Auburn, AL 36849
United States

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