Green Tilts

81 Pages Posted: 31 May 2023 Last revised: 11 Jan 2024

See all articles by Lubos Pastor

Lubos Pastor

University of Chicago - Booth School of Business

Robert F. Stambaugh

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Lucian A. Taylor

University of Pennsylvania - The Wharton School

Multiple version iconThere are 2 versions of this paper

Date Written: January 8, 2024

Abstract

We estimate financial institutions' portfolio tilts that relate to stocks' environmental, social, and governance (ESG) characteristics. In 2021, ESG-related tilts total 6% of the investment industry's assets and average 22% of institutions' total portfolio tilts. ESG tilts are larger for less-volatile stocks and for institutions with smaller size and greater active share, consistent with our theoretical predictions. Significant ESG tilts arise from the choice of stocks held and, especially, the weights on stocks held. The largest institutions tilt increasingly toward green stocks, while other institutions and households tilt increasingly brown. UNPRI signatories and European institutions tilt greener, banks browner.

Keywords: ESG, sustainable investing, portfolio tilt

JEL Classification: G11, G23

Suggested Citation

Pastor, Lubos and Stambaugh, Robert F. and Taylor, Lucian A., Green Tilts (January 8, 2024). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, University of Chicago, Becker Friedman Institute for Economics Working Paper, The Wharton School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4464537 or http://dx.doi.org/10.2139/ssrn.4464537

Lubos Pastor (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-4080 (Phone)
773-702-0458 (Fax)

HOME PAGE: http://www.ChicagoGSB.edu/fac/lubos.pastor/

Robert F. Stambaugh

University of Pennsylvania - The Wharton School ( email )

The Wharton School, Finance Department
University of Pennsylvania
Philadelphia, PA 19104-6367
United States
215-898-5734 (Phone)
215-898-6200 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lucian A. Taylor

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

HOME PAGE: http://finance.wharton.upenn.edu/~luket/

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