Sustainable Investing: Evidence from the Field

Seminar summary

We survey 509 equity portfolio managers from both traditional and sustainable funds on whether and why they incorporate firms’ environmental and social (“ES”) performance into investment decisions. Financial considerations are the primary reason, even among sustainable funds. Few are willing to sacrifice financial returns for ES performance, largely due to fiduciary duty, and voting and engagement are driven by financial considerations. The second reason is constraints. Fund mandates, firmwide policies, or client wishes caused 71% to make stock selection, voting, or engagement decisions that they would otherwise not have. Some of these actions had financial consequences, such as avoiding stocks that would improve returns or diversification; others had ES consequences, such as avoiding stocks whose ES performance they could have improved. Investors view ES issues with greater granularity than studies that simply correlate aggregate ES scores with firm performance. Individual ES issues have differential materiality across different firms, they may interact with non-ES factors, and they may matter more on the downside than upside. Some investor beliefs contradict academic research: many believe that good ES performers deliver positive alpha, that carbon emissions reduce returns, and that board diversity increases returns.

How to attend this seminar

This seminar will take place online on Wednesday 15 May 2024 at 2pm.

The seminar is free to attend and we ask that you to please contact Dr Anna Sarkisyan for the zoom link.

Speaker bio

Professor Dirk Jenter

Dirk Jenter is a Professor of Finance at the London School of Economics and was previously a faculty member at Stanford and MIT. He is a Research Associate of CEPR, a Research Member of ECGI, and a former Research Fellow of NBER. His research focuses on corporate governance, the selection and compensation of top executives, mergers and acquisitions, and interactions of firms with investors and capital markets. His work has been published in all top finance journals, has garnered several research awards, and has been featured in, among others, the Financial Times, the Wall Street Journal, and the Economist. He is an Associate Editor of the Journal of Finance and has been an Associate Editor of the Review of Financial Studies. He has an M.Phil. in Economics from the University of Cambridge and M.A. and Ph.D. degrees in Business Economics from Harvard University.