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Do ESG progress disclosures influence investment decisions?

Author

Listed:
  • Amanda Sanseverino

    (Manhattan College)

  • Jimena González-Ramírez

    (Manhattan College)

  • Kelly Cwik

    (Manhattan College)

Abstract

Firms frequently provide voluntary environmental, social, and governance (ESG) reports. Our study focuses on the effect of ESG disclosures on investment decisions. We compare the influence of disclosures containing only forward-looking ESG targets with those containing both targets and progress made toward those targets. Specifically, using responsible sourcing issues in chocolate production as a setting, we conduct a survey experiment to examine whether nonprofessional investors assign value to disclosures of ESG progress toward targets, relative to “target-only” disclosures. Based upon our analysis, although ESG disclosures lead participants in both groups to increase their investment allocation on average, we do not find evidence of a significant incremental effect of ESG progress reporting. As progress metrics are expected to enhance a disclosure’s relevance and representational faithfulness, our study draws attention to challenges in nonprofessional investors’ use of ESG disclosure information in their capital allocation choices. Our study also provides insight into how nonprofessional investors, who make up an increasing share of US equity trading activity, perceive ESG disclosures.

Suggested Citation

  • Amanda Sanseverino & Jimena González-Ramírez & Kelly Cwik, 2024. "Do ESG progress disclosures influence investment decisions?," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(1), pages 107-126, March.
    • Handle: RePEc:pal:ijodag:v:21:y:2024:i:1:d:10.1057_s41310-023-00198-0
    DOI: 10.1057/s41310-023-00198-0
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    More about this item

    Keywords

    Corporate social responsibility; Environmental; social; and governance issues; Investment decision-making; Investor perceptions; Sustainability; Voluntary disclosures;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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