How Does ESG Shape Consumption?

Exploiting 150 million points of purchase by US households, we examine how negative ESG shocks ripple through product market and shape consumption. We show that the sales of affected products drop by an average of 5 - 10%, comparing with that of unaffected products consumed by the same households during the same period of time. The observed contraction is mainly demand-driven, rather than a reflection of the manufacturer’s decision to phase out production. This effect is strongest among millennial, middle-class households, and for more severe ESG shocks. Furthermore, we find that salience about climate issues heterogeneously affects the household’s response. Lastly, we map the shocks to 28 narrowly-defined ESG issues and identify significant heterogeneity among consumer’s reaction to these issues. In summary, we present the first comprehensive product-level evidence on the financial materiality of ESG, via the household consumption channel