A Green Wave in Media, a Change of Tack in Stock Markets

This paper explores the impact of green sentiment in US media on financial markets. Using textual analysis with a dictionary-based approach, we retrieve several scores of attention, tonality and uncertainty in the coverage of environmental news of four major US newspapers. We consider various weighting schemes to account for the visibility and relevance of the text sources and several sets of newspapers to measure the possible impact of their editorial line. Our results establish that greater attention to environmental news in US media reduced the excess returns of carbon-intensive stocks and increased their volatility over the last decade, especially when the coverage was negative or uncertain. The opposite result holds for the most virtuous green assets. Restricting the corpus of texts to conservative newspapers mitigates the impact of the coverage. Overall, our findings illustrate how rising environmental concerns lead investors to shift their asset allocation.