Sustainable Investing Home and Abroad

92 Pages Posted: 12 Apr 2024

See all articles by Ines Chaieb

Ines Chaieb

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Lucie Y. Lu

University of Melbourne, Faculty of Business and Economics

Date Written: March 13, 2024

Abstract

We study how firm ESG performance affects domestic and foreign institutional investments. At the firm level, the marginal effects of ESG on institutional ownership vary across institution origin and investment destination countries. At the institution-firm level, institutions tilt towards high-ESG firms only when they are domestic. We term this asymmetry in ESG preference between domestic and foreign investment the "ESG home bias". We explore ESG information environment, country E&S awareness, and ESG factor discount as potential economic mechanisms and find that the ESG home bias reflects a combination of these factors, the most important being information asymmetry about the ESG outcome measured by ESG uncertainty.

Keywords: institutional investors, international investment, ESG

JEL Classification: G15, G23, G32

Suggested Citation

Chaieb, Ines and Errunza, Vihang R. and Lu, Lucie Yiliu, Sustainable Investing Home and Abroad (March 13, 2024). Available at SSRN: https://ssrn.com/abstract=4758387 or http://dx.doi.org/10.2139/ssrn.4758387

Ines Chaieb

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
+41223798568 (Phone)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Vihang R. Errunza

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-4056 (Phone)
514-398-3876 (Fax)

Lucie Yiliu Lu (Contact Author)

University of Melbourne, Faculty of Business and Economics ( email )

198 Berkeley Street
Parkville, Victoria 3053
Australia

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