ESG Messaging on Social Media and Cost of Capital: A Canadian Perspective

ABSTRACT We examine whether environmental, social and governance (ESG) communications on social media decrease firms' cost of equity. Our results show that ESG messaging on social media does not appear to influence investors, which leads us to examine why. Using sentiment analysis, we find that firms’ ESG communications are largely positive on social media, suggesting that firms are selective in their disclosures. Furthermore, we find that firms do not consistently follow through on the ESG commitments they make on social media. Our analysis suggests that firms' comments on social media resemble window dressing more so than genuine ESG commitments, which can lead investors to disregard these messages as simply white noise.