Speaker:
Tom Gosling
London Business School and ECGI
Discussant:
Pedro Matos
University of Virginia and ECGI
Abstract
Paper Authors: Alex Edmans, Tom Gosling, and Dirk Jenter
We survey 509 equity portfolio managers from both traditional and sustainable funds on whether, why, and how they incorporate firms’ environmental and social (“ES”) performance into investment decisions. ES performance influences stock selection, engagement, and voting for over three quarters of investors, including nearly two thirds of traditional investors. A primary reason is financial considerations, even among sustainable funds. Few are willing to sacrifice financial returns for ES performance, largely due to fiduciary duty concerns, and voting and engagement are mainly financially motivated. A second reason is constraints. Fund mandates, firmwide policies, client wishes, or concern for the fund’s sustainability rating or reputation caused 72% 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.
