Abstract

Sustainability ratings condense complex corporate activities into comparable indicators, but investors encounter those indicators alongside narratives whose emphasis and linguistic orientation vary. This manuscript examines how positive language in environmental, social, and governance reports conditions the association between ESG ratings and corporate profitability. The underlying study assembles 10,021 reports issued by Chinese listed companies during 2009–2021 and retains 9,321 firm-year observations after matching and sample restrictions. Positive tone is measured as the proportion of words classified as favorable within each report. Firm and year fixed effects regressions relate return on equity to SINO ESG ratings, tone, and their interaction, with standard errors clustered by company and year. The baseline interaction is positive, with an estimate of 0.1259, whereas the separate tone coefficient is not statistically distinguishable from zero. The evidence is consistent with a stronger ESG–profitability association when reporting adopts a more positive orientation. Differences across information environments and investor categories suggest that the relationship is conditional: it is more apparent in several less transparent or closely scrutinized settings, among long-horizon institutional investors, and among companies without QFII participation. Alternative measures, matching, selection models, and supplementary specifications provide varying degrees of support. Cross-provider rating disagreement and some inconsistencies between narrative descriptions and reported estimates qualify the breadth of the conclusions. The findings support examining disclosure language jointly with quantitative sustainability assessments, while providing no basis for treating optimistic wording as an independent cause of profitability or equating QFII participation with all foreign ownership.