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The Sustainability Footprint of Institutional Investors

Author

Listed:
  • Rajna Gibson

    (University of Geneva and Swiss Finance Institute)

  • Philipp Krueger

    (University of Geneva and Swiss Finance Institute)

Abstract

Institutional investors are the single most important class of shareholders in stock markets. Yet, knowledge about their motivations for embedding environmental and social — or more generally — sustainability considerations in their portfolio allocations is at best emerging. In this paper, we propose a novel approach to measure the environmental, social, and aggregate sustainability footprint at the institutional investor portfolio-level. We provide evidence that institutional investors with longer investment horizons — as measured by investors’ legal type or portfolio turnover — exhibit significantly better sustainability footprints. We also document that institutional investors with better sustainability footprints generate higher risk-adjusted performance, primarily through a reduction of portfolio risk. Overall, our results are consistent with the view that institutional investors choose sustainability oriented portfolio allocations with the objective of long-term value maximization.

Suggested Citation

  • Rajna Gibson & Philipp Krueger, 2017. "The Sustainability Footprint of Institutional Investors," Swiss Finance Institute Research Paper Series 17-05, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1705
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2918926
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    Citations

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    Cited by:

    1. Stefano Ramelli & Alexander F. Wagner & Richard J. Zeckhauser & Alexandre Ziegler, 2018. "Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock," NBER Working Papers 25310, National Bureau of Economic Research, Inc.
    2. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    3. Chen, Tao & Dong, Hui & Lin, Chen, 2020. "Institutional shareholders and corporate social responsibility," Journal of Financial Economics, Elsevier, vol. 135(2), pages 483-504.
    4. Stefano Ramelli & Alexander F Wagner & Richard J Zeckhauser & Alexandre Ziegler, 2021. "Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections [Asset pricing with liquidity risk]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(4), pages 748-787.
    5. Jean-Stéphane Mésonnier, 2019. "Banks' climate commitments and credit to brown industries: new evidence for France," Working papers 743, Banque de France.
    6. Tamas Barko & Martijn Cremers & Luc Renneboog, 2022. "Shareholder Engagement on Environmental, Social, and Governance Performance," Journal of Business Ethics, Springer, vol. 180(2), pages 777-812, October.
    7. Ralph De Haas & Alexander Popov, 2023. "Finance and Green Growth," The Economic Journal, Royal Economic Society, vol. 133(650), pages 637-668.
    8. Julia Anna Bingler & Chiara Colesanti Senni, 2020. "Taming the Green Swan: How to improve climate-related financial risk assessments," CER-ETH Economics working paper series 20/340, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    9. Anna Gervasoni & Francesco Bollazzi & Margherita Mietto, 2022. "Private equity for the development of smart cities: the Italian case," LIUC Papers in Economics 2022-14, Cattaneo University (LIUC).
    10. Alexandre Garel & Arthur Petit-Romec, 2020. "Investor Horizons and Employee Satisfaction: A test of the long-term perspective vision of CSR," Economics Bulletin, AccessEcon, vol. 40(1), pages 765-781.
    11. Isabel‐María García‐Sánchez & Lázaro Rodríguez‐Ariza & Beatriz Aibar‐Guzmán & Cristina Aibar‐Guzmán, 2020. "Do institutional investors drive corporate transparency regarding business contribution to the sustainable development goals?," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 2019-2036, July.
    12. Mario La Torre & Fabiomassimo Mango & Arturo Cafaro & Sabrina Leo, 2020. "Does the ESG Index Affect Stock Return? Evidence from the Eurostoxx50," Sustainability, MDPI, vol. 12(16), pages 1-12, August.
    13. Marco Ceccarelli & Stefano Ramelli & Alexander F Wagner, 2024. "Low Carbon Mutual Funds," Review of Finance, European Finance Association, vol. 28(1), pages 45-74.

    More about this item

    Keywords

    Investment horizon; Institutional investors; sustainability footprint; portfolio turnover; risk-adjusted performance; CSR; ESG impact; SRI; sustainable investing; impact investing; environmental footprint; social footprint;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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