The Irrelevance of ESG Disclosure to Retail Investors: Evidence from Robinhood

Using an hourly dataset on retail investor security positions from Robinhood Markets, we find that ESG disclosures are irrelevant to retail investors’ portfolio allocation decisions. The response to ESG press releases by retail investors is no different than the routine portfolio adjustments that occur on non-event days. In contrast, these same investors make economically meaningful changes to their portfolios in response to press releases that do not pertain to ESG, especially those that pertain to earnings announcements. Our findings are not due to a lack of statistical power or other data shortcomings. Our conclusions contrast with evidence from experimental studies that retail investors respond favorably to ESG disclosures. In addition, while prior ESG studies have generally viewed investors as a single homogeneous group, our findings suggest that it is important to distinguish between retail and institutional investors.