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Why and How Investors Use ESG Information: Evidence from a Global Survey

41 Pages Posted: 2 Mar 2017 Last revised: 16 Jul 2017

Amir Amel-Zadeh

University of Oxford - Said Business School

George Serafeim

Harvard University - Harvard Business School

Date Written: July 2017

Abstract

Using survey data from a sample of senior investment professionals from mainstream (i.e. not SRI funds) investment organizations we provide insights into why and how investors use reported environmental, social and governance (ESG) information. Relevance to investment performance is the most frequent motivation for use of ESG data followed by client demand and product strategy, bringing change in companies, and then ethical considerations. Important impediments to the use of ESG information are the lack of reporting standards and as a result lack of comparability, reliability, quantifiability and timeliness. Among the different ESG investment styles, negative screening is perceived as the least investment beneficial while full integration into stock valuation and engagement are considered more beneficial but they are all practiced with equal frequency. Current practices of different ESG styles, especially screening, are driven by product and ethical considerations. In contrast, integration is driven by relevance to investment performance. Future practices of ESG styles are driven by relevance to investment performance, bringing change in companies, and concerns about data reliability.

Keywords: ESG, Sustainability, Investment Performance, Nonfinancial, Disclosure

JEL Classification: G12, G14, G15, G23, G32, M1, M2, M4

Suggested Citation

Amel-Zadeh, Amir and Serafeim, George, Why and How Investors Use ESG Information: Evidence from a Global Survey (July 2017). Harvard Business School Accounting & Management Unit Working Paper . Available at SSRN: https://ssrn.com/abstract=2925310 or http://dx.doi.org/10.2139/ssrn.2925310

Amir Amel-Zadeh (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

George Serafeim

Harvard University - Harvard Business School ( email )

381 Morgan Hall
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=15705

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