Market interest in nonfinancial information

Market interest in nonfinancial (e.g., Environmental, Social, and Governance [ESG]) information, including data produced by the Carbon Disclosure Project (CDP), is growing. Using data from Bloomberg we analyze this interest from a variety of different perspectives, and in doing so are able to provide a level of granularity about market interest in nonfinancial information that has not yet been provided. The data reveal a number of interesting insights. First, there is a large market interest in the level of a company’s degree of transparency around ESG performance and policies, as shown in Disclosure scores calculated by Bloomberg. This high level of interest in ESG disclosure scores might be the result of investors using ESG disclosure quality as a proxy for management quality (Goldman Sachs, 2009). Second, at the aggregate market level, interest in Environmental and Governance information is greater than interest in Social information. Higher interest in environmental data relative to social data could be attributed to the fact that environmental implications are easier to quantify and integrate into valuation models compared to social data. A long and significant stream of literature and research findings on the implications of governance for firm performance and riskiness (Becht, Bolton, and Roell, 2003) could be the cause of the higher interest in governance data.