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Exploring Positive Social Capital ESG Events


By Mackenzie Hargrave  |  May 24, 2022

Stock prices react to environmental, social, and governance (ESG) news. However, the market reaction to ESG news is typically not directly related to operations or fundamental firm information. Instead, the reaction is due to the content of ESG news itself, according to new research by Harvard's George Serafeim and Northwestern's Aaron Yoon.

Serafeim and Yoon found that markets react most strongly to social capital, specifically product impacts. This is noteworthy because an earlier paper by Serafeim and Katie Trihn found that ESG ratings traditionally don’t capture product impacts, creating an information gap that needs to be filled by external sources.

When analyzing ESG information from external sources, not just company reports, clearly the content of the ESG news is important. However, today’s abundance of information calls for a scaled, technology-driven approach to capturing ESG signals from unstructured data.

This article explores FactSet’s event detection product, Truvalue SASB Spotlight Events, through the lens of Serafeim and Yoon’s findings to see how these Spotlight Events may be used to anticipate the market’s reaction to ESG information. We then go a step further to identify corporate behavioral patterns revealed through a history of similar ESG events.

Detecting Positive and Negative ESG Events

The technology underpinning Truvalue data algorithmically detects positive and negative ESG events, termed Spotlight Events, by identifying clusters of articles related to the same company and topic and serves up metadata and quantitative scores for each event. Spotlight Events offer a succinct way to analyze positive and negative corporate behavior, without relying on the manual review of thousands of media sources.

Serafeim and Yoon find that “news related to social capital, and more specifically to product-related impacts, generate the most consistent and significant market reactions.” Social capital refers to a category of ESG topics as defined by the Sustainability Accounting Standards Board (SASB):

  • Access and Affordability
  • Customer Privacy
  • Customer Welfare
  • Data Security
  • Human Rights and Community Relations
  • Product Quality and Safety
  • Selling Practices and Product Labeling

As shown in the table below, social capital news (positive and negative) is heavily concentrated within the Healthcare, Technology, Finance, and Consumer Non-Cyclicals sectors, as defined by FactSet’s Revere Business Industry Classification System (RBICS).

Social Capital Spotlights (Jan 2021 – April 2022)

SASB Pillar

RBICS Sector

% of Spotlight Events within SASB Pillar

Spotlight Count

Social Capital













Consumer Non-Cyclicals




Consumer Cyclicals




Consumer Services












Non-Energy Materials








Business Services







Source: FactSet

A closer look at the distribution of Spotlight Events across these industries reveals a similar distribution of positive, negative, and neutral events. These events are also generally distributed across companies, as shown by the values on the stacked bars below.


Serafeim and Yoon find that positive news related to Customer Welfare and Product Quality and Safety are associated with positive market reactions of 2.9% and 5.2%, respectively. Between March and April 2022, there were 243 positive Spotlight Events tagged in these categories. Their research suggests that news captured by these Spotlights Events is likely to elicit a positive market reaction.

Below is a small sample of meaningful positive events relative to individual companies’ history of ESG events, as measured by the change in article score and number of articles associated with the event.


These Spotlight Events, which can be easily screened for and quantitatively analyzed for significance using the Standout Level, offer valuable insight into the positive (or negative) news that drives changes in corporate ESG scores.

Contextualizing Events through Spotlight Themes

Each of the Spotlights captured above represents an individual ESG event. In addition, we observe that similar events related to the same topic can repeat in the Spotlight Event data over extended periods of time, supplementing or reaffirming the shorter-term observations.

We evaluated a sample of Spotlights to see how company events relate to each other over time. To do this, we aggregated Spotlight Events based on topical similarity and created collections of related Spotlight Events, referred to here as SpotThemes. These collections offer historical context to unfolding ESG events, which investors can act on as long-term ESG themes.

SpotThemes were identified by applying a textual similarity grouping or “clustering” technique to the headlines associated with each Spotlight within a category for each firm. These identified subsets are related to one another. Common terms were then extracted and ranked by frequency within the collection of headlines, allowing us to infer a theme.

For example, the Chipotle Spotlight Event shown in the table above was part of a SpotTheme composed of nine events between 2016 and 2022. This SpotTheme reveals that the most recent positive news regarding Chipotle testing RFID tags, which are used to track ingredients through the supply chain, followed a string of events related to food safety concerns and restaurant closures. This important context is missing when looking at the most recent event in isolation.

Chipotle Product Quality and Safety Events: 2016-2022





Ranked Theme Terms

Chipotle Mexican Grill Inc.

Product Quality and Safety


Chipotle is testing RFID tags to track ingredients for food safety

chipotle food safety restaurant close reopens




Food safety: Chipotle will retrain all restaurant employees on food safety procedures after illness detected





Union study points to food safety risks at Chipotle restaurants





Chipotle reopens Ohio restaurant after illness scare





Chipotle lawsuit over food safety; outbreaks is dismissed





Quit whining about our food safety alerts CDC to Chipotle





Chipotle reopens Massachusetts restaurant





Chipotle closes restaurants across country for food safety meeting





Chipotle will close every restaurant on February 8


Source: FactSet

The value of the context provided by this SpotTheme is clear when considering the volume of Spotlight Events for companies like Chipotle with a high volume of news flow. Chipotle has had over 20 Spotlights in the last four years related to Product Quality and Safety—here we can systematically identify those related specifically to food safety. This provides an entirely new lens through which to understand ESG events as they unfold.



The market reacts to ESG news and the content of that news matters. Here we introduce a new way to understand themes behind ESG events and deliver context at scale by measuring patterns of corporate behavior in specific ESG focus areas over time.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

Truvalue Labs Academic Roundtable

Mackenzie Hargrave

Senior Principal Product Manager, ESG Solutions

Ms. Mackenzie Hargrave is Senior Principal Product Manager for ESG Solutions at FactSet. In this role, she assists in the execution of FactSet’s ESG strategy through collaboration with FactSet’s product development, sales, marketing, and strategy teams. She and her colleagues aim to power the next generation of ESG strategies with innovative data and workflow solutions. Ms. Hargrave earned a B.S. in Environmental Economics from Colgate University.


The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.