Do Responsible Investors Invest Responsibly?

Abstract

We study if institutional investors that join the Principles for Responsible Investment (PRI), the largest responsible investment initiative, exhibit better portfolio-level environmental, social and governance (ESG) scores. Signatory institutions have better ESG scores but this holds only outside of the United States. In contrast, US-domiciled PRI signatories exhibit at best similar, if not worse ESG scores, particularly those signatories that have underperformed recently, are retail-client facing and that have joined the initiative recently. We also find that clients’ flows do not discriminate US PRI signatories according to their level of ESG incorporation.

Keywords: ESG, SRI, PRI, socially responsible investing, sustainability, institutional investors, greenwashing

JEL Classification: G15, G23, G30, M14