Responsible Institutional Investing Around the World

Abstract

We explore a novel survey on responsible investing by institutional investors around the world and match it to archival data on their equity portfolio holdings. We document that institutions that publicly commit to responsible investing exhibit better environmental, social, and governance (ESG) portfolio-level scores (“footprints”) but this is not the case for US-domiciled institutions. We observe considerable heterogeneity among responsible investors but when we examine whether specific ESG implementation strategies (e.g., screening, integration, engagement) affect portfolio-level ESG footprints we find limited evidence. Finally, we document that responsible investing does not enhance portfolio returns but acts as a risk mitigation tool.

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

JEL Classification: G15, G23, G30, M14