The PRI Academic Seminar Series invites leading ESG experts to present their research to academic scholars and investors.
The aim of the series is to:
- give world thought leaders in responsible investing the opportunity to present their work and obtain valuable feedback
- provide an opportunity to junior scholars to network with the speaker and obtain career advice
- be more inclusive and strengthen our global PRI Academic Network community throughout the year
Rob Bauer, 27 January 2023
Private Shareholder Engagements on Material ESG Issues
We study private shareholder engagements with 2,465 publicly listed firms from 2007 to 2020 about environmental, social, and governance (ESG) issues. We examine to what extent private engagements address financially material ESG issues and contribute to firm performance. We find that around 75% of engagements are financially material and that targets of successful material engagements significantly outperform their peers by 2.5% over the next 14 months. Further, we find that material engagements are more often significantly associated with improvements in profitability, sales, and cost ratios than immaterial engagements. Finally, our evidence indicates that a decrease in CO2e intensity accompanies environmental engagements but that total CO2 emissions are unaffected.
Rob Bauer is a Professor of Finance at Maastricht University School of Business and Economics.
Stefano Giglio, 4 November 2022
ESG Beliefs and Investor Portfolios
We study a survey of ESG beliefs and preferences of a large panel of retail investors, and link it to administrative data on their portfolio composition and trading activity. The survey asks two ESG-related questions: what long-term return investors expect from ESG investments, and what motivations they have, if any, to invest in ESG: ethical considerations, performance expectations, and hedging reasons (that is, that ESG investments perform better when climate risks materialize). We highlight several patterns. First, on average, investors expect lower return from ESG investments compared to the market, consistent with the idea that ESG provide some benefits to investors (in terms of utility or hedging). Second, we find substantial heterogeneity in investors’ motivations for ESG investing, with 40% not finding any reason to invest, and 60% mentioning ethical reasons, performance expectations, or hedging motives. Third, there is a significant link between the expectations and ESG motivations of investors and actual ESG holdings. Finally, we find that the heterogeneity in portfolio holdings is large, with especially younger investors tilting more strongly towards ESG.
Stefano Giglio is a Professor of Finance at the Yale School of Management.