Green Sentiment in Financial Markets: A Global Warning

Abstract

We use textual analysis to measure the growing concern about climate issues and to assess its impact on stock prices in the United States. Using a dataset of 71,785 articles published in The Wall Street Journal from 2010 to 2019, we create several scores capturing media coverage of environmental issues and investigate their influence on S&P500 constituents in a Fama-French model. We find a significant impact of green sentiment on the stock returns of nearly 25% of firms. The response varies across the different sectors. The effect is negative in energy and materials, particularly in chemicals and metals. A positive impact is found in real estate and utilities. An assessment of the results at company level shows that this impact is related to their environmental performance. The results are robust to the use of alternative lexicons and weighting schemes, various specifications and sample periods.