Catering through Transparency: Voluntary ESG Disclosure by Asset Managers and Fund Flows

Abstract

Environmental, Social, and Governance (ESG) disclosure by institutional investors can help channel responsible capital toward institutions with better ESG practices. We examine institutional investors that must disclose their ESG practices after voluntarily joining the Principles for Responsible Investment (PRI), the largest responsible investment network. Upon joining, investors annually submit publicly available, standardized ESG reports, which are assessed and scored by the PRI. Clients allocate more assets to institutions that receive higher scores on their disclosure, especially if corroborated by third-party ESG fund ratings. The disclosure correlates with more sustainable portfolios and more ESG engagements in countries where responsible institutional asset owners have a stronger presence, and with higher engagement elsewhere.   

Keywords: PRI signatories, voluntary investor disclosure, ESG investing, fund flows, PRI reporting framework

JEL Classification: G23, G4, M41