How environmental media narratives shape the sustainability premium
DOI:
https://doi.org/10.18559/ebr.2026.3.2962Keywords:
sustainability premium, ESG, environmental narratives, investor sentiment, media attention, factor models, climate risk, asset pricingAbstract
This paper examines whether environmental narratives constitute an independent and state-dependent pricing channel in equity markets beyond conventional ESG scores and aggregate climate risk measures. Using more than 220 million US news articles, we construct indicators of environmental narrative sentiment and thematic intensity and analyse their effects on equal-weighted and value-weighted ESG portfolio premia. The empirical framework augments the Fama–French five-factor model with explicit climate risk and macroeconomic uncertainty controls and allows for delayed pricing effects. We find that environmental narratives, particularly attention-based measures, exert economically relevant effects on the equal-weighted sustainability premium, even after controlling for standard asset-pricing factors and climate-related risk indices, whereas the corresponding effects are substantially weaker in value-weighted portfolios. In contrast, aggregate ESG and climate risk measures display weak and unstable explanatory power once narratives are accounted for. The effects differ substantially across portfolio weighting schemes, while the lagged specifications provide more limited evidence of persistent delayed effects.
JEL Classification
Asset Pricing • Trading Volume • Bond Interest Rates (G12)
Information and Market Efficiency • Event Studies • Insider Trading (G14)
Corporate Culture • Diversity • Social Responsibility (M14)
Climate • Natural Disasters and Their Management • Global Warming (Q54)
Downloads
References
Alessi, L., Ossola, E., & Panzica, R. (2021). What greenium matters in the stock market? The role of greenhouse gas emissions and environmental disclosures. Journal of Financial Stability, 54, 100869. https://doi.org/10.1016/j.jfs.2021.100869
View in Google Scholar
DOI: https://doi.org/10.1016/j.jfs.2021.100869
Alves, R., Krüger, P., & van Dijk, M. (2025). Drawing up the bill: Are ESG ratings related to stock returns around the world? Journal of Corporate Finance, 93, 102768. https://doi.org/10.1016/j.jcorpfin.2025.102768
View in Google Scholar
DOI: https://doi.org/10.1016/j.jcorpfin.2025.102768
Andreu, L., de Mingo-López, D. V., Matallín-Sáez, J. C., & Sarto, J. L. (2026). Media attention to climate change and investor flows in US equity mutual funds. Business Strategy and the Environment, 35(5), 6555–6576. https://doi.org/10.1002/bse.70458
View in Google Scholar
DOI: https://doi.org/10.1002/bse.70458
Azevedo, V., Kaserer, C., & Campos, L. M. S. (2021). Investor sentiment and the time-varying sustainability premium. Journal of Asset Management, 22(7), 600– 621. https://doi.org/10.1057/s41260-021-00233-1
View in Google Scholar
DOI: https://doi.org/10.1057/s41260-021-00233-1
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131(4), 1593–1636. https://doi.org/10.1093/qje/qjw024
View in Google Scholar
DOI: https://doi.org/10.1093/qje/qjw024
Bhargava, R., Lou, X., Ozik, G., Sadka, R., & Whitmore, T. (2023). Quantifying narratives and their impact on financial markets. Journal of Portfolio Management, 49(5), 82–95. https://doi.org/10.3905/jpm.2023.1.472
View in Google Scholar
DOI: https://doi.org/10.3905/jpm.2023.1.472
Bolton, P., & Kacperczyk, M. T. (2021). Do investors care about carbon risk? Journal of Financial Economics, 142(2), 517–549. https://doi.org/10.1016/j.jfineco.2021.05.008
View in Google Scholar
DOI: https://doi.org/10.1016/j.jfineco.2021.05.008
Bua, G., Kapp, D., Ramella, F., & Rognone, L. (2024). Transition versus physical climate risk pricing in European financial markets: A text-based approach. European Journal of Finance, 30(17), 2076–2110. https://doi.org/10.1080/1351847X.2024.2355103
View in Google Scholar
DOI: https://doi.org/10.1080/1351847X.2024.2355103
Caldara, D., & Iacoviello, M. (2022). Measuring geopolitical risk. American Economic Review, 112(4), 1194–1225. https://doi.org/10.1257/aer.20191823
View in Google Scholar
DOI: https://doi.org/10.1257/aer.20191823
Cesarone, F., Martino, M. L., Ricca, F., & Scozzari, A. (2024). Managing ESG ratings disagreement in sustainable portfolio selection. Computers & Operations Research, 170, 106766. https://doi.org/10.1016/j.cor.2024.106766
View in Google Scholar
DOI: https://doi.org/10.1016/j.cor.2024.106766
Chen, T. (2017). Investor attention and global stock returns. Journal of Behavioral Finance, 18(3), 358–372. https://doi.org/10.1080/15427560.2017.1331235
View in Google Scholar
DOI: https://doi.org/10.1080/15427560.2017.1331235
Choi, S., & Choi, W. Y. (2019). Effects of limited attention on investors’ trading behavior. Pacific-Basin Finance Journal, 56, 273–289. https://doi.org/10.1016/j.pacfin.2019.06.007
View in Google Scholar
DOI: https://doi.org/10.1016/j.pacfin.2019.06.007
Ciciretti, R., Dalò, A., & Dam, L. (2023). The contributions of betas versus characteristics to the ESG premium. Journal of Empirical Finance, 71, 104–124. https://doi.org/10.1016/j.jempfin.2023.01.004
View in Google Scholar
DOI: https://doi.org/10.1016/j.jempfin.2023.01.004
Da, Z., Engelberg, J., & Gao, P. (2011). In search of attention. Journal of Finance, 66(5), 1461–1499. https://doi.org/10.1111/j.1540-6261.2011.01679.x
View in Google Scholar
DOI: https://doi.org/10.1111/j.1540-6261.2011.01679.x
Das, K. K., & Yaghoubi, M. (2025). Climate sentiment-induced stock liquidity. International Journal of Managerial Finance, 21(5), 1414–1436. https://doi.org/10.1108/IJMF-04-2025-0187
View in Google Scholar
DOI: https://doi.org/10.1108/IJMF-04-2025-0187
Dierckx, T., Davis, J., & Schoutens, W. (2021). Quantifying news narratives to predict movements in market risk. In Y. Malevergne & D. Sornette (Eds.), Data science for economics and finance (pp. 265–285). Springer. https://doi.org/10.1007/978-3-030-66891-4_12
View in Google Scholar
DOI: https://doi.org/10.1007/978-3-030-66891-4_12
Dong, Y., & Ni, C. (2014), Does limited attention constrain investors’ acquisition of firm-specific information? Journal of Business Finance & Accounting, 41(9–10), 1361–1392. https://doi.org/10.1111/jbfa.12098
View in Google Scholar
DOI: https://doi.org/10.1111/jbfa.12098
Fahmy, H. (2025). Empty pledges and powerless conventions: How transition climate risks are disrupting financial markets? International Review of Financial Analysis, 105, 104384. https://doi.org/10.1016/j.irfa.2025.104384
View in Google Scholar
DOI: https://doi.org/10.1016/j.irfa.2025.104384
Ferro, A., Marazzina, D., & Stocco, D. (2025). Uncovering ESG ratings: The imbalance of aspirational and performance features. Corporate Social Responsibility and Environmental Management, 32(5), 5895–5917. https://doi.org/10.1002/csr.70007
View in Google Scholar
DOI: https://doi.org/10.1002/csr.70007
Gaies, B. (2025). Exploring the time-varying predictability of global financial instability over the last two decades: The influence of climate change news. Journal of Economic Studies, 52(5), 904–918. https://doi.org/10.1108/JES-01-2024-0031
View in Google Scholar
DOI: https://doi.org/10.1108/JES-01-2024-0031
Gao, Y., Wang, Y., Wang, C., & Liu, C. (2018). Internet attention and information asymmetry: Evidence from Qihoo 360 search data on the Chinese stock market. Physica A: Statistical Mechanics and Its Applications, 510, 802–811. https://doi.org/10.1016/j.physa.2018.07.016
View in Google Scholar
DOI: https://doi.org/10.1016/j.physa.2018.07.016
Guastella, G., Mazzarano, M., Pareglio, S., & Xepapadeas, A. (2022). Climate reputation risk and abnormal returns. International Review of Financial Analysis, 84, 102365. https://doi.org/10.1016/j.irfa.2022.102365
View in Google Scholar
DOI: https://doi.org/10.1016/j.irfa.2022.102365
Li, Y., & Zhou, B. (2026). Research on the impact of extreme climate on financial asset price: Based on the DSGE model. International Review of Economics & Finance, 105, 104817. https://doi.org/10.1016/j.iref.2025.104817
View in Google Scholar
DOI: https://doi.org/10.1016/j.iref.2025.104817
López-Cabarcos, M. Á., Pérez-Pico, A. M., & López-Pérez, M. L. (2019). Does social network sentiment influence S&P 500 environmental & socially responsible index? Sustainability, 11(2), 320. https://doi.org/10.3390/su11020320
View in Google Scholar
DOI: https://doi.org/10.3390/su11020320
Mangee, N. (2021). How novelty and narratives drive the stock market. Cambridge University Press.
View in Google Scholar
DOI: https://doi.org/10.1017/9781108974899
Naughton, J. P., Wang, C., & Yeung, I. (2019). Investor sentiment for corporate social performance. Accounting Review, 94(4), 401–420. https://doi.org/10.2308/accr-52303
View in Google Scholar
DOI: https://doi.org/10.2308/accr-52303
Ongan, S., Göçer, İ., & Işık, C. (2025). Introducing the new ESG-based sustainability uncertainty index (ESGUI). Sustainable Development, 33(3), 4457–4467. https://doi.org/10.1002/sd.3351
View in Google Scholar
DOI: https://doi.org/10.1002/sd.3351
Pástor, L., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550–571. https://doi.org/10.1016/j.jfineco.2020.12.011
View in Google Scholar
DOI: https://doi.org/10.1016/j.jfineco.2020.12.011
Salisu, A. A., Ndako, U. B., & Vo, X. V. (2023). Transition and physical climate risk. Resources Policy, 81, 103383. https://doi.org/10.1016/j.resourpol.2023.103383
View in Google Scholar
DOI: https://doi.org/10.1016/j.resourpol.2023.103383
Serafeim, G. (2020). Public sentiment and the price of corporate sustainability. Financial Analysts Journal, 76(2), 26–46. https://doi.org/10.1080/0015198X.2020.1723390
View in Google Scholar
DOI: https://doi.org/10.1080/0015198X.2020.1723390
Tetlock, P. C. (2007). Giving content to investor sentiment: The role of media in the stock market. Journal of Finance, 62(3), 1139–1168. https://doi.org/10.1111/j.1540-6261.2007.01232.x
View in Google Scholar
DOI: https://doi.org/10.1111/j.1540-6261.2007.01232.x
Vu, T. N., Lehkonen, H., Junttila, J. P., & Lucey, B. (2025). ESG investment performance and global attention. North American Journal of Economics and Finance, 75, 102287. https://doi.org/10.1016/j.najef.2024.102287
View in Google Scholar
DOI: https://doi.org/10.1016/j.najef.2024.102287
Wołczek, P. (2025). Using ML to analyze ESG ratings to support the investors’ decision-making process. Procedia Computer Science, 270, 5037–5046. https://doi.org/10.1016/j.procs.2025.09.630
View in Google Scholar
DOI: https://doi.org/10.1016/j.procs.2025.09.630
Xu, X., Chen, Y., Zhao, J., & Wang, J. (2022). The effect of ESG news on the Chinese stock market. Journal of Global Information Management, 30(1), 1–21. https://doi.org/10.4018/JGIM.313916
View in Google Scholar
DOI: https://doi.org/10.4018/JGIM.313916
Yousaf, I., Bejaoui, A., Ali, S., & Li, Y. (2024). Demystifying the dynamic relationship between news sentiment index and ESG stocks: Evidence from time-frequency wavelet analysis. International Review of Financial Analysis, 96, 103698. https://doi.org/10.1016/j.irfa.2024.103698
View in Google Scholar
DOI: https://doi.org/10.1016/j.irfa.2024.103698
Zhou, M., & Ma, Y. (2025). Physical vs. transition climate risks: Asymmetric effects on stock return predictability. International Review of Financial Analysis, 104, 104266. https://doi.org/10.1016/j.irfa.2025.104266
View in Google Scholar
DOI: https://doi.org/10.1016/j.irfa.2025.104266
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Attila Zoltán Nagy, Beatrix Steiner, Vivien Csapi

This work is licensed under a Creative Commons Attribution 4.0 International License.

