Do fund managers’ commitments to responsible investing affect private information acquisition, information environment, and corporate sustainability?

65 Pages Posted: 14 Sep 2023 Last revised: 7 Nov 2024

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Johan Sulaeman

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN); European Corporate Governance Institute (ECGI); Asian Bureau of Finance and Economic Research (ABFER)

Yue Zhang

Sun Yat-sen University (SYSU)

Zhe zong

PwC Management Consulting

Date Written: November 7, 2024

Abstract

We investigate the effects of mutual funds’ commitments to responsible investing on their information acquisition activities and the corresponding externalities for other stakeholders. After committing to responsible investing (via UNPRI), fund managers increase private information acquisition activities, i.e., corporate site visits, particularly focusing on environmental and social issues. These visits generate negligible private investment value for the visiting funds. However, the information environment at the stock level improves following these visits with lower consensus analyst forecast errors. In addition to the information production role of these visits, they also generate positive externalities for other stakeholders through incremental improvements in the sustainability practices of the firms receiving sustainability-focused site visits from UNPRI fund managers. Collectively, the paper highlights the private costs and social benefits of responsible investing.

Keywords: responsible investing, information acquisition, information environment, corporate visit, mutual funds, United Nations Principles for Responsible Investment (UNPRI)

JEL Classification: M41, M14, G23, G14

Suggested Citation

Agarwal, Sumit and Sulaeman, Johan and Zhang, Yue and Zong, Zhe, Do fund managers’ commitments to responsible investing affect private information acquisition, information environment, and corporate sustainability? (November 7, 2024). Available at SSRN: https://ssrn.com/abstract=4568714 or http://dx.doi.org/10.2139/ssrn.4568714

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Johan Sulaeman

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN) ( email )

Singapore

HOME PAGE: http://sites.google.com/site/johansulaeman/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/johan-sulaeman

Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Yue Zhang (Contact Author)

Sun Yat-sen University (SYSU) ( email )

Zhuhai Campus, SYSU
Zhuhai, Guangdong 519082
China

Zhe Zong

PwC Management Consulting

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