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Does Paying Passive Managers to Engage Improve ESG Performance?

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  • Marco BECHT
  • Julian FRANKS
  • Hideaki MIYAJIMA
  • Kazunori SUZUKI

Abstract

The paper studies a natural experiment in responsible investment conducted by the Japanese Government Pension Investment Fund (GPIF). In 2018 GPIF gave its largest passive manager a remunerated mandate to engage with portfolio companies to improve ESG and adopted best-in-class indexes, rewarding high-ESG-scoring companies with additional equity investment. Using private data and difference-in-differences analysis we show that engagement by the asset manager improved scores. In an event study, we find that the conditional portfolio tilt significantly impacts share prices. We also provide evidence that ESG scores for companies in Japan increased significantly more than for companies in other countries.

Suggested Citation

  • Marco BECHT & Julian FRANKS & Hideaki MIYAJIMA & Kazunori SUZUKI, 2023. "Does Paying Passive Managers to Engage Improve ESG Performance?," Discussion papers 23077, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:23077
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    File URL: https://www.rieti.go.jp/jp/publications/dp/23e077.pdf
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    References listed on IDEAS

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    5. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    6. Philipp Krueger & Zacharias Sautner & Laura T Starks, 2020. "The Importance of Climate Risks for Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1067-1111.
    7. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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    Cited by:

    1. Heeb, Florian & Kölbel, Julian, 2024. "The impact of climate engagement: A field experiment," SAFE Working Paper Series 437, Leibniz Institute for Financial Research SAFE.

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