Bridging the Gap in ESG Measurement: Using NLP to Quantify Environmental, Social, and Governance Communication

11 Pages Posted: 7 Dec 2023

See all articles by Tobias Schimanski

Tobias Schimanski

University of Zurich

Andrin Reding

University of St. Gallen (HSG)

Nico Reding

University of St. Gallen (HSG)

Julia Bingler

University of Oxford

Mathias Kraus

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Markus Leippold

University of Zurich; Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: November 3, 2023

Abstract

Environmental, social, and governance (ESG) criteria take a central role in fostering sustainable development in economies. However, a remarkable gap exists in the precise and transparent measurement of ESG. To address this problem, we propose and validate a new set of NLP models to assess textual disclosures toward all three subdomains of ESG in three steps. First, we use our corpus of over 13.8 million text samples from corporate reports and news to pre-train new specific E, S, and G models. Second, we create three 2k datasets to create classifiers that detect E, S, and G texts in corporate disclosures. Third, we validate our model by showcasing that the communication patterns detected by the models can effectively explain variations in ESG ratings. Thus, this paper introduces a novel and robust method to bridge the significant gap in assessing corporate disclosures towards sustainability.

Keywords: ESG, Natural Language Processing, Sustainability

Suggested Citation

Schimanski, Tobias and Reding, Andrin and Reding, Nico and Bingler, Julia and Kraus, Mathias and Leippold, Markus, Bridging the Gap in ESG Measurement: Using NLP to Quantify Environmental, Social, and Governance Communication (November 3, 2023). Available at SSRN: https://ssrn.com/abstract=4622514 or http://dx.doi.org/10.2139/ssrn.4622514

Tobias Schimanski

University of Zurich ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Andrin Reding

University of St. Gallen (HSG) ( email )

St.Gallen, 9000
Switzerland

Nico Reding

University of St. Gallen (HSG) ( email )

St.Gallen, 9000
Switzerland

Julia Bingler

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Mathias Kraus

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

Markus Leippold (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
805
Abstract Views
1,912
Rank
52,531
PlumX Metrics