Review of Finance Vol. 26 No. 6 2022

Do Responsible Investors Invest Responsibly?

Rajna Gibson Brandon^1,2; Simon Gloßner³; Philipp Krueger^1,2,4; Pedro Matos^2,5; Tom Steffen⁶

¹ University of Geneva, Geneva Finance Research Institute, Geneva, Switzerland · ² ECGI, Brussels, Belgium · ³ The Board of Governors of the Federal Reserve System, Washington DC, USA · ⁴ Swiss Finance Institute, Zurich, Switzerland · ⁵ University of Virginia Darden School of Business, Charlottesville, VA, USA · ⁶ Osmosis Investment Management, London, UK

Abstract

We study whether institutional investors that sign the Principles for Responsible Investment (PRI), a commitment to responsible investing, exhibit better portfolio-level environmental, social, and governance (ESG) scores. Signatories outside of the USA have superior ESG scores than nonsignatories, but US signatories have at best similar ESG ratings, and worse scores if they have underperformed recently, are retail-client facing, and joined the PRI late. US signatories do not improve the ESG scores of portfolio companies after investing in them. Commercial motives, uncertainty about fiduciary duties, and lower ESG market maturity explain why US-domiciled PRI signatories do not follow through on their responsible investment commitments.

DOI

10.1093/rof/rfac064

Volume

26

Issue

6

Pages

1389-1432

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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