Greenwash, Panic, or Profit? Decoding How Sustainability News Hijacks Equity Investor Sentiment

Given the rising global interest in Environmental, Social, and Governance (ESG), this paper investigates whether a company’s ESG news affects equity investors’ sentiment, addressing a gap in the relevant research. Interest in ESG investing has grown rapidly, yet existing research measures investor sentiment only indirectly—through market-wide proxies such as the CBOE Volatility Index, low-frequency investor surveys, or realized stock returns—measures that conflate sentiment with risk aversion and fundamentals and cannot isolate firm-specific reactions to ESG news. This study measures investor sentiment directly from investors’ own expressions: we pair firm-day ESG news-sentiment scores for all S&P 500 constituents with investor sentiment extracted from stock-related tweets using a finance-tuned RoBERTa model. Using Bayesian Ridge Regression (BRR), the study finds that ESG news significantly impacts equity investors’ sentiment. This study contributes to both academic and managerial practice by establishing the association and sensitivity of ESG news and investor sentiment in academic literature and proposing a framework for firms to practice effective sustainability management.