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
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: Suggested Citation