People and investor attention to climate change

AbstractThe paper analyses whether people's attention to climate change emergency contributes to the stock market returns by accounting for the mitigation role of the corporate social performance proxied by ESG score. We address one research question: how does climate change attention affect the investors' trading behavior and, consequently, the stock price returns of local firms? The Google Search Volume Index (GSVI) is used to evaluate the attention parameter. In a global setting, made by 2941 stocks in both advanced and emerging economies between 2006 and 2019, we revealed that attention to climate change helps investors to have a significantly positive effect on returns of stocks with high ESG scores compared to low sustainable stocks. Moreover, we observe an interesting changing in the relationship between corporate social performance and people attention, when deepening the analysis from the perspective of sectorial distribution. Our results are robust to different risk factor models, environmental policy stringency framework, sin industries focus, and when changing people's attention indicator.KEYWORDS: Climate changeESGCSRpublic attentionstock returns AcknowledgmentsThe authors thank: John O.S. Wilson (University of St Andrews), Francesca Cuomo, Thomas J. Chemmanur (Boston College), Dimitrios Gounopoulos (University of Bath), Yu Zhang, (University of Bath), José Linares-Zegarra (University of Essex), Steven Xianglong Chen (University of Liverpool), Edward Lee (University of Manchester), Konstantinos Stathopoulos, (University of Manchester), Claudia Girardone (University of Essex), Laura Chiaramonte (Università Cattolica del Sacro Cuore), Luca Riccetti (University of Macerata) at 1st Workshop on Sustainability Reporting, Regulation & Practice 2021 organized by Essex Business School (EBS) and Norwich Business School; Giovanni Cerulli at 3rd GRAPE Meeting CNR, Rome 2019; for the helpful comments. Special thanks to Prof. Franco Fiordelisi supporting us at all stages of the paper and to the anonymous referees for giving us the chance to improve the manuscript's quality.Disclosure statementNo potential conflict of interest was reported by the author(s).Additional informationNotes on contributorsMauro AlianoMauro Aliano is a Banking and Finance Professor at the University of Ferrara (Economia and Management Department). He specializes in using statistical approaches to analyze financial markets, financial instrument analysis methodologies, and portfolio models. He was Professor in Banking and Finance at the University of Cagliari from 2014 to 2018, and a Research Fellow in Statistics for Finance at the University of Rome Tor Vergata from 2012 to 2014.Giuseppe GalloppoGiuseppe Galloppo is a Professor of Finance and Professor of Climate Finance at the PhD in Economics, Management and Quantitative Methods, at La Tuscia University of Viterbo. Giuseppe has published scientific papers in several top academic journals. His research area covers the following topics: Climate Finance, asset allocation, risk Management and the econometrics of financial markets. Additionally, he has worked as a member of several research teams including the CNR National Council of Research, the Statistical Information Commission, the ASEAN Observatory for the Italian Foreign Office Ministry. He has been a member of G20 group for Revitalizing Anemic Europe project at University of Roma Tor Vergata and he is a member of FINEST Network - Financial Intermediation Network of European Studies. In the Wealth Management Industry, he has been a Quantitative Asset Allocation Manager. He is Supervisor for the group of Research "Observatory ESG SMEs listed Companies" University of Tuscia partnership with Banca Finnat.Viktoriia PaimanovaViktoriia Paimanova, holds a PhD in Banking and Finance from the University of Rome Tor Vergata. She also has a Candidate of sciences degree in Economic Theory and Economic Methods in Management from V.N.Karazin Kharkiv National University, Kharkiv (Ukraine). Her research area of interest is dedicated to investment decisions and sustainability (climate finance and ESG investing). She has been teaching climate finance course at University of Rome Tor Vergata, University of Rome Tre, University of Limoges and University of Viterbo La Tuscia. She is a research fellow at Campus Bio-Medico University in Rome.