Analyzing Active Managers' Commitment to ESG: Evidence from United Nations Principles for Responsible Investment

47 Pages Posted: 29 Apr 2020 Last revised: 18 May 2020

Date Written: March 17, 2020

Abstract

We analyze active managers’ commitment to ESG using United Nations Principles for Responsible Investment (PRI), which is the largest global initiative to incorporate ESG. We find a significant increase in fund flow to signatory funds regardless of their prior fund-level ESG score. However, signatories do not improve fund-level ESG score while exhibiting a decrease in return. Further, they vote less on environmental issues and stocks in their portfolio experience increased environmental controversies. Funds that are smaller, younger, and had higher historical alpha are more likely to sign PRI but only quant-driven and institution-only funds improve ESG post signing. Overall, only a small number of funds improve ESG while many others use the PRI status to attract capital without making notable changes to ESG.

Keywords: ESG, SRI, UN PRI, Asset Manager, Mutual Funds

JEL Classification: G20

Suggested Citation

Kim, Soohun and Yoon, Aaron, Analyzing Active Managers' Commitment to ESG: Evidence from United Nations Principles for Responsible Investment (March 17, 2020). Available at SSRN: https://ssrn.com/abstract=3555984 or http://dx.doi.org/10.2139/ssrn.3555984

Soohun Kim

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

Aaron Yoon (Contact Author)

Northwestern University - Department of Accounting Information & Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,006
Abstract Views
4,333
rank
23,843
PlumX Metrics