The thematic content of ESG reports: A topic modelling approach.

ESG (Environmental, Social and Governance) reports are becoming mainstream, but their thematic content remains unknown to investors. Based on a sentence-based topic modelling, we open the black box and identify 30 topics contained in ESG reports. We find that the thematic content of ESG reports contains information value to better estimate future ESG and financial performance. After categorizing topics between the economical, social and governance pillars, we find that investors place the most value on social topics, with an emphasis on the easiest to measure subjects. An imbalance in the reporting of E, S or G pillar is associated with poorer future financial performance and a lower ESG score. Finally, we look at the ESG reports of energy companies and observe that investors react primarily to environmental themes. Finally, we conclude our paper by drawing key lessons and contextualizing our analysis in light of current trends in the financial sphere.