Download This PaperGreen Tilts
Jacobs Levy Equity Management Center for Quantitative Financial Research Paper
University of Chicago, Becker Friedman Institute for Economics Working Paper
75 Pages Posted: 31 May 2023 Last revised: 31 Aug 2023
There are 3 versions of this paper
Green Tilts
Green Tilts
Green Tilts
Date Written: August 29, 2023
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 nearly 25% 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: Suggested Citation
Lubos Pastor (Contact Author)
University of Chicago - Booth School of Business ( email )
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Robert F. Stambaugh
University of Pennsylvania - The Wharton School ( email )
The Wharton School, Finance Department
University of Pennsylvania
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Lucian A. Taylor
University of Pennsylvania - The Wharton School ( email )
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HOME PAGE: http://finance.wharton.upenn.edu/~luket/