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L’investissement socialement responsable : Changement structurel et faux semblant
Abstract
L’ISR est aujourd’hui bien implanté auprès des professionnels de la finance (gestionnaires de fonds ou investisseurs institutionnels) chez lesquels il rencontre un large succès. Toutefois, il peine à susciter le même engouement auprès du grand public, mis à part quelques particuliers au profil bien précis. Dans cet article, les auteurs essaient de comprendre les réticences des épargnants et proposent deux types d’explications : l’une renvoie à la défiance du public vis-à-vis des banques et des marchés financiers en général ; l’autre est liée à la façon dont les professionnels communiquent en particulier sur l’ISR en vantant ses performances financières ou sa résilience et en se gardant bien, le plus souvent, de s’engager sur les aspects extra-financiers.
Créé en 2016, le label ISR français a été introduit afin de dissocier les OPCVM conventionnels de ceux qui mettent en avant des objectifs extra-financiers. En analysant des OPCVM investissant sur le marché des actions de la zone euro, cet article a pour objectif de comprendre l'impact financier des contraintes extra-financières requises par le label. Les résultats montrent que les OPCVM labélisés présentent des rendements au moins en ligne avec le marché et les OPCVM conventionnels. Ainsi, le label ISR permet de financer des émetteurs responsables sans coût financier notable.Classification JEL : G11, M14.
CNRS 4, FNEGE 3, HCERES B
We study behind-the-scenes investor activism promoting environmental, social, and governance (ESG) improvements by means of a proprietary dataset of a large international, socially responsible activist fund. We examine the activist’s target selection, forms of engagement, impact on ESG performance, drivers of success, and effects on the targets’ operations and value creation. Target firms are typically large and visible, perform well, and have high liquidity (stock turnover) and low ESG performance. Engagement induces ESG rating adjustments: firms with poor ex ante ESG ratings experience a ratings increase after complying with the activist’s demands, whereas firms with high ex ante ESG ratings experience a ratings decrease following the revelation of their ESG problems. Activism that is focused on environmental and social issues is more likely to succeed if targets are ESG-sensitive (i.e., they have a strong ex ante ESG profile). Successful engagements boost targets’ sales. Risk-adjusted excess stock returns (with four-factor adjustment and relative to a matched sample of non-engaged firms) of successful engagements outperform those of unsuccessful engagements by 2.7%. Results are especially strong for firms with low ex ante ESG scores. Specifically, targeted firms in the lowest ex ante ESG quartile outperform matched peers by 7.5% in the year after the end of the engagement. Our results thus suggest that the activism regarding corporate social responsibility generally improves ESG practices and corporate sales and is profitable to the activist. Taken together, we provide direct evidence that ethical investing and strong financial performance, both from the activist’s and the targeted firm’s perspective, can go hand-in-hand together.
The United Nations’ Sustainable Development Goals (SDGs) have created societal and political pressure for pension funds to address sustainable investing. We run two field surveys (n = 1,669, n = 3,186) with a pension fund that grants its members a real vote on its sustainable-investment policy. Two-thirds of participants are willing to expand the fund’s engagement with companies based on selected SDGs, even when they expect engagement to hurt financial performance. Support remains strong after the fund implements the choice. A key reason is participants’ strong social preferences.
This article explores whether and how long-term investors influence non-executive employees’ incentives. While long-term investors benefit from long-term investments that create value over time, employees tend to be averse to long-term investments. We conjecture that long-term investors foster employee-related CSR to motivate employees to engage in long-term investment projects. Consistent with this prediction, we find that long-term investor ownership is a strong driver of employee-related CSR. Additional analyses indicate that this result is not driven by self-selection or reverse causality. We further show that employee-related CSR leads to increased long-term investments (R&D expenses and corporate innovation). Overall, our findings highlight that employee-related CSR is an important channel through which long-term investors encourage long-term investments.
We show that mutual funds compete for climate-conscious investment flows. In April 2018, Morningstar introduced a climate-focused label for mutual funds. The release of the "Low Carbon Designation" induced reactions on both the demand and supply sides of the market. First, investors flocked to funds receiving this eco-label. Second, active funds that missed the label at its initial release responded to the new incentive by shifting their holdings towards more climate-friendly firms. In sum, climate-related information can trigger competition by financial intermediaries along their climate performance. However, the resulting portfolio shifts may also expose investors to higher idiosyncratic risks.
Although a growing stream of research investigates the role of government in corporate social responsibility (CSR), little is known about how governmental CSR interventions interact in financial markets. This article addresses this gap through a longitudinal study of the socially responsible investment (SRI) market in France. Building on the “CSR and government” and “regulative capitalism” literatures, we identify three modes of governmental CSR intervention—regulatory steering, delegated rowing, and microsteering—and show how they interact through the two mechanisms of layering (the accumulation of interventions) and catalyzing (the alignment of interventions). Our findings: 1) challenge the notion that, in the neoliberal order, governments are confined to steering market actors—leading and guiding their behavior—while private actors are in charge of rowing—providing products and services; 2) show how governmental CSR interventions interact and are orchestrated; and 3) provide evidence that governments can mobilize financial markets to promote CSR.
Given the increasing role of socially responsible investing (SRI), but still limited participation of individual (i.e. small, retail) investors, the objective of this study is twofold: (i) We aim to identify investment barriers regarding SRI for individual investors and analyze to what extent these barriers vary across different investor groups. (ii) We analyze to what extent sustainability or transparency labels can help to overcome these barriers. To this end, we empirically analyze data from a survey and a stated choice experiment for a broad sample of financial decision makers in German households. The results suggest that a considerable amount of respondents can imagine to invest in a socially responsible manner, which is promising for policymakers and practitioners who aim to foster sustainable development and SRI. However, too high information costs are a severe barrier for potential future investors and a considerable share of respondents distrusts providers of socially responsible investment products. Banks, who could help to solve this problem, appear not to fulfill their role as intermediaries. But we find that labels might serve as a complement to banks. Especially sustainability certificates that confirm the consideration of sustainability criteria could decrease information costs and overcome at least some barriers for some investor groups, particularly for new investors. However, the results also suggest that a certain degree of basic knowledge and trust in providers of socially responsible investment products is required before labels work efficiently.
This paper explores whether Sustainable and Responsible Investment (SRI) products and strategies in South Africa take environmental sustainability into account. It is based on a qualitative, empirical survey of 22 organisations which are signatories to the United Nation's Principle for Responsible Investment or offering an SRI product. By looking at how environmental, social, and governance (ESG) criteria are practically used in investment decision making and share ownership decisions, we found that most SRI products and strategies largely focus on social developmental goals whereas environmental criteria do not yet receive comparable attention from the SRI South African fund management industry.
This paper assesses whether shareholders drive the environmental and social (E&S) performance of firms worldwide. Across 41 countries, institutional ownership is positively associated with E&S performance with additional tests suggesting this relation is causal. Institutions are motivated by both financial and social returns. Investors increase firms’ E&S performance following shocks that reveal financial benefits to E&S improvements. In cross section, investors increase firms’ E&S performance when they come from countries with a strong community belief in the importance of E&S issues, but not otherwise. As such, these institutional investors transplant their social norms regarding E&S issues around the world.
This paper examines the relationships between corporate governance and corporate sustainability by focusing on two main components of companies’ governance structure: boards of directors (BoDs) and investor relations officers (IROs). We propose an original empirical strategy based on the 120 biggest French capitalizations for the year 2013, allowing us to measure boards of directors’ independence and expertise, as well as investor relations officers’ convictions and communication on corporate sustainability. Our results show that corporate governance has an ambiguous impact on corporate sustainability because of opposing forces: internal, external and intermediate forces. On the one hand, the higher the proportion of inside directors, the higher the company’s environmental and governance performance, while the higher the proportion of general experts in the board room, the lower the company’s governance performance. On the other hand, investor relations officers’ beliefs that corporate sustainability is primarily driven by investors’ ethical values appear negatively related to companies’ governance performance. In sum, corporate sustainability appears positively related to internal forces (inside directors) and negatively related to external forces (general expert directors and investor activist engagement). The results of this study demonstrate the need to carry out efforts to train BoDs (specifically inside directors) and IROs to respond to corporate sustainability and to take more of a leadership role in this area.
Through a survey and analyses of observational data, we provide systematic evidence that institutional investors value and demand climate risk disclosures. The survey reveals the investors have a strong demand for climate risk disclosures, and many actively engage their portfolio firms for improvements. Empirical analyses of holdings data corroborate this evidence by showing a significantly positive association between climate-conscious institutional ownership and better firm-level climate risk disclosure. We establish further evidence of institutional investors’ influence on firms’ climate risk disclosures by examining a shock to the climate risk disclosure demand of French institutional investors (French Article 173).
Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
This paper investigates the divergence of environmental, social, and governance (ESG) ratings based on data from six prominent ESG rating agencies: Kinder, Lydenberg, and Domini (KLD), Sustainalytics, Moody’s ESG (Vigeo-Eiris), S&P Global (RobecoSAM), Refinitiv (Asset4), and MSCI. We document the rating divergence and map the different methodologies onto a common taxonomy of categories. Using this taxonomy, we decompose the divergence into contributions of scope, measurement, and weight. Measurement contributes 56% of the divergence, scope 38%, and weight 6%. Further analyzing the reasons for measurement divergence, we detect a rater effect where a rater’s overall view of a firm influences the measurement of specific categories. The results call for greater attention to how the data underlying ESG ratings are generated.
Socially responsible investors constitute an important force in today's global financial markets. This paper examines conditions under which socially responsible investors induce companies to behave responsibly. We develop an asset pricing model in which some shareholders are active owners, that is, they engage companies by voting on strategic decisions. Differences of objective among shareholders arise because socially responsible investors value corporate externalities. In our baseline model, we show that a firm may choose a responsible strategy even if the majority of investors are not responsible. We also demonstrate that such a choice of a responsible strategy might be fragile because it might depend on investors' self‐fulfilling beliefs. We then extend our baseline model to analyse the link between divestment and engagement strategies, the case with multiple firms, the role of benefit corporation charters, and the impact of a large investor.
This paper examines the role of the “Big Three” (i.e., BlackRock, Vanguard, and State Street Global Advisors) on the reduction of corporate carbon emissions around the world. Using novel data on engagements of the Big Three with individual firms, we find evidence that the Big Three focus their engagement effort on large firms with high CO2 emissions in which these investors hold a significant stake. Consistent with this engagement influence being effective, we observe a strong and robust negative association between Big Three ownership and subsequent carbon emissions among MSCI index constituents, a pattern that becomes stronger in the later years of the sample period as the three institutions publicly commit to tackle Environmental, Social, and Governance (ESG) issues.
The COVID-19 shock and its unprecedented financial consequences have brought about vast uncertainty concerning the future of climate actions. We study the cross-section of stock returns during the COVID-19 shock to explore investors' views and expectations about environmental issues. The results show that firms with responsible strategies on environmental issues experience better stock returns. This effect is mainly driven by initiatives addressing climate change (e.g., reduction of environmental emissions and energy use), is more pronounced for firms with greater ownership by investors with long-term orientation and is not observed prior to the COVID-19 crisis. Overall, the results indicate that the COVID-19 shock has not distracted investors' attention away from environmental issues but on the contrary led them to reward climate responsibility to a larger extent.
Les investisseurs institutionnels s'engagent-ils dans la question des externalités produites par les entreprises, telles que les émissions de gaz à effet de serre ? Nous étudions le vote dans les assemblées générales des actionnaires de deux investisseurs emblématiques : BlackRock, un gérant de portefeuille majeur au niveau international, et le Fonds Norvégien, un fonds souverain responsable. Nos données couvrent l'année 2014 et contiennent 35 382 résolutions votées par les deux institutions dans 2 796 entreprises partout dans le monde. Les deux investisseurs, dits universels, s'opposent au management plus souvent sur des questions liées aux externalités que sur des questions financières. Le Fonds norvégien est plus actif sur les résolutions portant sur des externalités liées aux questions environnementales et sociales que sur celles de gouvernance. La différence de comportement entre les deux investisseurs est encore plus importante si l'on se focalise sur les résolutions liées au changement climatique. Au final, la logique de philanthropie déléguée semble être une motivation plus forte que celle d'investisseur universel pour combattre les externalités. Classification JEL : F21, G11, G23, Q54, Q56.
We find that people revise their beliefs about climate change upward when experiencing warmer than usual temperatures in their area. Using international data, we show that attention to climate change, as proxied by Google search volume, increases when the local temperature is abnormally high. In financial markets, stocks of carbon-intensive firms underperform firms with low carbon emissions in abnormally warm weather. Retail investors (not institutional investors) sell carbon-intensive firms in such weather, and return patterns are unlikely to be driven by changes in fundamentals. Our study sheds light on peoples’ collective beliefs and actions about global warming.
We examine the role of ESG performance during market-wide financial crisis, triggered in response to the COVID-19 global pandemic. The unique circumstances create an inimitable opportunity to question if investors interpret ESG performance as a signal of future stock performance and/or risk mitigation. Using a novel dataset covering China’s CSI300 constituents, we show (i) high-ESG portfolios generally outperform low-ESG portfolios (ii) ESG performance mitigates financial risk during financial crisis and (iii) the role of ESG performance is attenuated in ’normal’ times, confirming its incremental importance during crisis. We phrase the results in the context of ESG investment practices.
We estimate institutional investor preferences from proxy voting records. The W-NOMINATE method maps investors onto a left-right dimension based on votes for fiscal year 2012. Public pension funds and other investors on the left support a more social and environment-friendly orientation of the firm and fewer executive compensation proposals. “Money-conscious” investors appear on the right. The proxy advisor ISS makes voting recommendations that place it center, to the left of most large mutual funds. A second dimension reflects a more traditional governance view, with management-disciplinarian investors, the proxy advisor Glass Lewis among them, pitted against more management-friendly ones.
Examining a shock to the salience of the sustainability of the U.S. mutual fund market, we present causal evidence that investors marketwide value sustainability: being categorized as low sustainability resulted in net outflows of more than 24 billion. Experimental evidence suggests that sustainability is viewed as positively predicting future performance, but we do not find evidence that high‐sustainability funds outperform low‐sustainability funds. The evidence is consistent with positive affect influencing expectations of sustainable fund performance and nonpecuniary motives influencing investment decisions. This article is protected by copyright. All rights reserved
Institutional investors appear to have selective preferences regarding corporate social responsibility. They appear indifferent to the presence of positive environmental (E) and social (S) indicators, but underweight stocks with negative ES indicators. This asymmetric pattern is particularly strong for longer-horizon institutions. Our empirical analyses indicate that this pattern is likely driven by economic incentives as the presence of negative ES indicators reflect downside risks: higher stock return skewness and probability of eventual bankruptcy and/or delisting. Positive ES indicators seem irrelevant in this context. Time-varying economic incentives also drive the dynamic pattern of institutional ownership of stocks with static negative indicators due to their controversial products (e.g., tobacco and firearms).
This study uses two distinct quasi-natural experiments to examine the effect of institutional shareholders on corporate social responsibility (CSR). We first find that an exogenous increase in institutional holding caused by Russell Index reconstitutions improves portfolio firms’ CSR performance. We then find that firms have lower CSR ratings when shareholders are distracted due to exogenous shocks. Moreover, the effect of institutional ownership is stronger in CSR categories that are financially material. Furthermore, we show that institutional shareholders influence CSR through CSR-related proposals. Overall, our results suggest that institutional shareholders can generate real social impact.
This article studies the case of the socially responsible investment industry in France. This case accounts for how the socially responsible investment category and practices have successfully moved from the margins of the industry in the late 1990s to become mainstream over two decades. We bring to the forefront the importance of three complementary factors in the process of causing corporations to transition toward more sustainable businesses: the role of investors and, in particular, institutional investors; the importance of the presence of a clear category definition and of intermediary organizations, providing ratings, scores, and other calculative devices; and the role of governments and regulators. With other studies, this case stresses the fundamental influence of investors in how corporations manage sustainability transitions.
This paper investigates whether or not shareholders benefit from corporate social responsibility (CSR) by studying the effect of institutional investors on CSR. After all, arguing against CSR is hard when investors push for it. I find that longer investor horizons lead to significantly more CSR. This positive effect, however, is moderated by long-term investors who hold large ownership blocks. Long-term blockholders ensure, through monitoring, that managers do not blindly increase CSR, but rather that managers pursue a CSR strategy that reduces the risk of costly incidents. A battery of robustness tests indicates causality. Overall, these findings indicate that CSR is in the interests of long-term investors if CSR prevents incidents.
Based on data from a representative survey among German private financial decision makers that comprised two stated choice experiments for fixed-interest investment products and equity funds, this paper empirically examines whether and which investors are willing to pay for sustainable investments. In fact, our econometric analyses with mixed and latent class logit models reveal strong stated preferences and a considerable willingness to pay (WTP) for sustainable investment products. Furthermore, our mixed logit model analysis implies that the mean WTP for certified sustainable investment products is strongly higher than the mean WTP for the uncertified counterparts. In addition, our estimation results suggest that investors with high feelings of warm glow from sustainable investments, an affinity to left-wing parties, and a strong environmental awareness have a clearly higher mean willingness to sacrifice returns for sustainable investment products than their counterparts. While risk perceptions seem to be additionally relevant for certified sustainable equity funds, they obviously play a negligible role for less risky sustainable fixed-interest investment products.
We provide a detailed holdings-based analysis of investment decisions made by U.S. equity SRI funds. Besides incorporating conventional fundamental factors, such as earnings growth, leverage, dividend yield, stock return and volatility, SRI funds adjust portfolio weights by considering companies’ relative ESG performance. This holds for all categories of passively and actively managed funds, while for active funds ESG scores have a higher economic impact for value rather than growth funds. The timing of inclusion of companies in active SRI funds or their exclusion is driven primarily by fundamentals rather than by ESG performance. We find that both active SRI and matched conventional funds integrate ESG information as well as financial criteria in their investment decisions, but SRI portfolios exhibit higher average sustainability scores. Finally, we posit that SRI screening criteria effectively guide investment decisions, positive screening resulting in higher active portfolio weights of best performers in a corresponding ESG pillar.
In recent years, socially responsible investment has acquired greater weight, for both individual and institutional investors. The segment of savers and investors worried about what is done with their money is growing. For this reason, financial institutions need to have a greater understanding of the characteristics and behaviours of these individuals. Most studies suggest that socio-demographic factors are not the fundamental difference between socially responsible investors and savers and conventional ones. Instead, the difference lies in attitudinal variables. However, we are aware of few studies to date that have analysed these variables.
As a result, the purpose of this paper is to analyse the explanatory variables of the intention to invest in a socially responsible manner. A relationship model is proposed, according to which the intention to invest in a socially responsible manner can be explained by three variables: the socially responsible consumption of the individual, their perception of the personal gain and their perception of the effectiveness of the action. The analysis of the relationships was carried out using the Partial Least Squares technique. A survey was conducted involving 415 customers of financial institutions.
According to the results, intention to invest in a socially responsible manner is explained by the three variables considered. The socially responsible consumption habits of the investor and the perception of the effectiveness attributed to the socially responsible investment have a direct and positive effect on intention. Whereas the perception of personal gain only has an indirect influence on intention, through the perception of the effectiveness of the action.
These results allow financial and collective investment institutions to understand how to design their marketing strategies.
This paper compares the resilience of ethical (Islamic and socially responsible) indexes among five developed (US, UK, Japan, Canada, Australia) and three emerging markets (Brazil, India, South Africa) during the period following the 2008 subprime crisis. It relies on a multivariate CAPM-EGARCH model that accounts for sudden changes in volatility through the application of an iterated cumulative sums of squares (ICSS) algorithm on daily data over the sample period 2008–2014 to model time-varying volatility and ensure reliable estimates. The study confirms the lower systemic risk associated with Islamic indexes during the bearish period and reports that SRI, despite being more subject to systemic risk, offered higher alphas in highly integrated markets, while Islamic indexes performed better in less integrated ones. The evidence also reveals a very limited increase in the models’ predictability power from the integration of sudden changes in volatility into the EGARCH models during the full sample period. This limit is more marked during the bearish sub-period. Our findings have important implications for international investment and portfolio diversification perspectives in times of financial downturn.
We study the effect of corporate social responsibility (CSR) on shareholder value. We argue that long-term investors can ensure that managers choose the amount of CSR that maximizes shareholder value. We find that long-term investors do increase the value to shareholders of CSR activities, not through higher cash flow but rather through lower cash flow risk. Following prior work, we use indexing by investors and state laws on stakeholder orientation for identification. Our findings suggest that CSR activities can create shareholder value as long as managers are properly monitored by long-term investors.
We examine the value consequences of corporate social responsibility through the lens of institutional shareholders. We find a sharp asymmetry between corporate policies that mitigate the firm’s exposure to environmental risk and those that enhance its perceived environmental friendliness (“greenness”). Institutional investors shun stocks with high environmental risk exposure, which we show have lower valuations, as predicted by risk management theory. These findings suggest that corporate environmental policies that mitigate environmental risk exposure create shareholder value. In contrast, firms that increase greenness do not create shareholder value and are also shunned by institutional investors.