ESG and Alternative Data: Capturing Corporates’ Sustainability-Related Activities with Job Postings

The emergence of environmental, social, and governance (ESG) investing resulted in a flurry of studies examining the effects of incorporating ESG considerations on portfolio performance. Limited attention, however, was given to analyzing corporate activities related to ESG and sustainability. The authors employ a novel dataset of over 200 million job postings by US firms since 2014 and use natural language processing to identify ESG-related openings and assess companies’ planned ESG activities. Using the job posting data allows one to learn about and monitor planned sustainability-related corporate activities based on firms’ actions, rather than relying solely on their announcements (i.e., what firms do as opposed to what firms say they do). The authors find that ESG job posting data can serve as a leading indicator of future changes in firms’ ESG ratings. Firms with higher abnormal ESG hiring posting intensity were more likely to experience subsequent rating improvements and enjoyed better stock performance 2–3 years following the posting date.