The Sustainability Narrative: A Multi Study Using Event Studies to Analyse the American Energy Companies Shareholder’s Reaction to Sustainability News

Abstract

This study investigates how shareholders of leading US energy companies value sustainability narratives. Leveraging the Global Database of Events (GDELT) from 2017 to 2019, 207,386 news items were extracted, 4101 event studies were performed, 3393 cumulative average abnormal returns (CAAR) were analysed, and 708 Abnormal volatilities (AV) were analysed. The magnitude of the analysis and further segmentation of the viral news by tone, type of energy, and environmental consequence help us to understand shareholders’ investment decisions and narrative. We proved that the sustainability narrative has a significant impact on shareholder value. There is a clear negative bias on sustainability news, impacting negatively on the market. More importantly, we’ve identified positive news about fossil fuels impacting the market more than positive renewable energy news. These results provide empirical evidence for the case of greenwashing in businesses. There must be a common shareholder’s narrative to penalise and reduce incentives for highly polluting investments to push forward an effective ecological transition. These results provide an objective for regulators to develop further regulations and incentives to fight against false sustainability news.