ESG talk on earnings calls moves retail investors in real time, study finds

Imagine an ordinary investor listening to a company's earnings call. As executives discuss environmental, social and governance (ESG) issues, such as emissions reduction targets, community initiatives or improvements in corporate governance, the investor decides to buy the company's stock.

According to new research titled “The Power of ESG Optimism: How Robinhood Investors Respond in Real Time”, published in the British Accounting Review, this scenario is more than hypothetical. Dr Zuben Jin from the International Business School Suzhou (IBSS) at Xi'an Jiaotong-Liverpool University analyses stock holdings of users on the US commission-free trading platform Robinhood and find that changes in the tone of ESG discussions during earnings calls can trigger immediate buying or selling by Robinhood investors.

The findings suggest that it is not only whether companies communicate about ESG, but also how executives communicate it, that matters. For listed companies, ESG discussions during earnings calls are no longer simply an add-on to financial reporting. Like earnings guidance or growth prospects, they can shape short-term capital flows. The study suggests that investor relations teams should view ESG communication as a strategic tool rather than merely a compliance requirement.

At the same time, the research highlights that the effect appears to be driven largely by investor attention (to ESG) and is relatively short-lived. While the tone of ESG communication can influence trading decisions, it cannot substitute for a company's underlying performance or long-term value. Companies that rely on persuasive ESG messaging without meaningful ESG practices are unlikely to generate sustained market returns.

"ESG communication is already influencing the flow of capital in real time," says Dr Jin. "This reminds companies that every ESG discussion with investors deserves careful attention. At the same time, attention should not be mistaken for trust, and short-term market reactions should not be confused with long-term value."

About the Author

Dr Zuben Jin joined IBSS as Assistant Professor in Finance in October 2024. Previously she served as an Associate Professor at Southwestern University of Finance and Economics. Her papers have been published in the Journal of Business Ethics, the Journal of Corporate Finance (ABS 4, ×2), the Journal of Business Finance & Accounting (ABDC A), and the British Accounting Review (ABDC A, ×2). She obtained her PhD in Finance from Singapore Management University in 2022, her MSc in Statistics (Financial Statistics) from the London School of Economics and Political Science (LSE) in 2017, and her BSc in Economics from the University of International Business and Economics (UIBE) in 2016. Her research interests include behavioural finance, AI in finance, FinTech, and sustainability.

About the Journal

The British Accounting Review is the official journal of the British Accounting and Finance Association (BAFA), established in 1969. The journal has a 2024 CiteScore of 8.1 and an Impact Factor of 9.4. It is rated A* in the ABDC Journal Quality Guide, ABS 3 stars in the Academic Journal Guide, and is listed in the JCR Q1 category.