A typical argument in the literature is that Corporate Social Responsibility (CSR) reduces the risk of conflicts with stakeholders. In accordance to this, we test whether: (i) domain specific CSR portfolios present pricing anomalies that could be captured by the introduction of risk factors accounting for exposition to stakeholder risk, (ii) this risk source is priced in the cross-section of stock returns. In doing so we are particularly cautious in disentangling the contributions of different CSR domains in generating the pricing anomalies. Our findings show the existence of pricing anomalies related to CSR, which vary in numbers across all the domains under analysis. Even if our domain-specific CSR risk factors are not able to capture all pricing anomalies, we find that they reduce their absolute value. Additionally, our results show that the stakeholder risk is priced in the cross-section of returns, and that such additional risk source presents different premiums for each domain.

We consider a network of equity mutual funds characterized by different levels of compliance with Environmental, Social, and Governance (ESG) aspects. We measure the impact of portfolio liquidation in a stress scenario on funds with different ESG ratings. Fire-sales spillover from portfolio liquidation propagates from one fund to another through indirect contagion mediated by common asset holdings. The analysis is conducted quarterly from March 2016 through June 2018 using daily data from different sources at the fund and firm levels. Our estimation strategy relies on a network analysis where funds are not taken as stand-alone entities but are interconnected components of a unified system. We find evidence that the relative market value loss of the High ESG ranked funds is lower than the loss experienced by the Low ESG ranked counterparts in the time span with lower volatility. In the higher-volatility period there is not always a clear dominance of one class over another. Results are robust when controlling for size and for feedback effects, and for different model specifications. Our analysis offers new insights to both asset managers and policymakers to exploit the aggregate effect of portfolio diversification related to the system as a whole.