The Sustainability Footprint of Institutional Investors: ESG Driven Price Pressure and Performance

77 Pages Posted: 16 Feb 2017 Last revised: 21 Jan 2021

See all articles by Rajna Gibson

Rajna Gibson

University of Geneva - Geneva Finance Research Institute (GFRI); European Corporate Governance Institute (ECGI)

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management

Shema F. Mitali

University of Geneva - Geneva School of Economics and Management

Date Written: September 7, 2020

Abstract

We propose a novel way of measuring the equity portfolio-level environmental and social characteristics of a 13F institution (the “sustainability footprint”) and examine the relation between sustainability footprints and risk-adjusted investment performance. The analysis shows that 13F institutions with better sustainability footprints outperform. The positive effect of sustainability footprints on the risk-adjusted performance of 13F institutions’ equity portfolios is concentrated in the environmental dimension and in more recent periods. Further tests show that the outperformance is explained by growing investor preferences for sustainable investing over time and the resulting price pressure that institutions exert on stocks with good environmental scores.

Keywords: ESG, sustainability footprint, environmental footprint, social footprint, risk-adjusted performance, price pressure, price impact, institutional investors, investment horizon, socially responsible investing, sustainable investing

JEL Classification: G20, G23, G30, M14, Q01, Q50

Suggested Citation

Gibson, Rajna and Krueger, Philipp and Mitali, Shema, The Sustainability Footprint of Institutional Investors: ESG Driven Price Pressure and Performance (September 7, 2020). Swiss Finance Institute Research Paper No. 17-05, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 571/2018, Available at SSRN: https://ssrn.com/abstract=2918926 or http://dx.doi.org/10.2139/ssrn.2918926

Rajna Gibson

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41.22.379.89.83 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Philipp Krueger (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute ( email )

Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Geneva - Geneva School of Economics and Management ( email )

Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

Shema Mitali

University of Geneva - Geneva School of Economics and Management ( email )

Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

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