Do Employees Care about ESG? Evidence from Employee Share Plans

Abstract

Using unique data on French firm-sponsored savings plans, we establish that there exists a significant negative relationship between firms’ ESG incidents and their employees’ investments in the company’s stock. Incidents in the “Social” category, especially those related to employee working conditions, exert the most substantial influence on these investment decisions. Conversely, incidents in the “Environment” and “Governance” categories exhibit no discernible impact. Pecuniary motives do not explain these findings. Overall, our results point to employees exhibiting parochial altruism, caring about their own interests and the interests of their colleagues within the company when making investment decisions in their company’s stock.

Keywords: ESG, 401(k), employee ownership, employee satisfaction

JEL Classification: G11, G41