Do Responsible Investors Invest Responsibly?

60 Pages Posted: 23 Feb 2020 Last revised: 9 Sep 2022

See all articles by Rajna Gibson

Rajna Gibson

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

Simon Glossner

Board of Governors of the Federal Reserve System

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

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Tom Steffen

Osmosis Investment Management

Date Written: May 25, 2021

Abstract

We study whether institutional investors that sign the Principles for Responsible Investment (PRI), a commitment to responsible investing, exhibit better portfolio-level environmental, social, and governance (ESG) scores. Signatories outside the US have superior ESG scores than non-signatories, but US signatories have at best similar ESG ratings, and worse scores if they have underperformed recently, are retail-client facing, and joined the PRI late. US signatories do not improve the ESG scores of portfolio companies after investing in them. Commercial motives, uncertainty about fiduciary duties, and lower ESG market maturity explain why US-domiciled PRI signatories do not follow through on their responsible investment commitments.

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

JEL Classification: G15, G23, G30, M14

Suggested Citation

Gibson, Rajna and Glossner, Simon and Krueger, Philipp and Matos, Pedro and Steffen, Tom, Do Responsible Investors Invest Responsibly? (May 25, 2021). Review of Finance (Forthcoming), Swiss Finance Institute Research Paper No. 20-13, European Corporate Governance Institute – Finance Working Paper 712/2020, Available at SSRN: https://ssrn.com/abstract=3525530 or http://dx.doi.org/10.2139/ssrn.3525530

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

Simon Glossner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Philipp Krueger

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

Pedro Matos (Contact Author)

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

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

Tom Steffen

Osmosis Investment Management ( email )

London
United Kingdom

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