A media-based ESG performance index constructed from sentiment analysis of news articles using TF-IDF and financial lexicons provides a more dynamic and objective measure of corporate ESG performance than traditional ESG ratings by capturing real-time media attention and tone instead of static disclosures.

Source: Does environmental, social, and governance news coverage affect the cost of equity? A textual analysis of media coverage

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In plain English

An ESG performance index built from analyzing news article sentiment with text analysis tools measures corporate environmental, social, and governance performance more dynamically and objectively than standard ESG ratings by using real-time media data instead of static reports.

See the scientific wording

The use of a media-based ESG performance index, constructed from sentiment analysis of news articles using TF-IDF and financial lexicons, provides a more dynamic and objective measure of corporate ESG performance than traditional ESG ratings, as it captures real-time media attention and tone rather than static disclosures.

Why this might work

News articles about a company's environmental and social behavior are analyzed for word usage and emotional tone, which reflects public and institutional attention. This analysis updates continuously as new articles appear, creating a live signal of how the market perceives the company’s responsibility, unlike static reports that only reflect past disclosures.

Hypothetical mechanismbased on 1 study

What the research says

1 study

Study: Does environmental, social, and governance news coverage affect the cost of equity? A textual analysis of media coverage
This study found that how much and how positively the news talks about a company’s environmental and social behavior can predict how cheaply it can borrow money—meaning this news-based method gives a more up-to-date and real-world view than old-fashioned ESG ratings.

Score breakdown, mechanism chain, raw evidence, ideal studies needed & 1 supporting studies

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