Abstract
We document a significant difference in the returns of sustainable investing across investor types. Investors with strict ESG mandates earn 3.1% less than flexible investors. The mechanism is that flexible investors are able to react on expected ESG improvements. They buy stocks that subsequently experience ESG score increases. After ESG improvements have realized, demand from strict mandate investors pushes up stock prices, resulting in positive returns for flexible investors. These returns are higher when accompanied by rising climate sentiment, as seen during the 2010s. Our channel accounts for 51% of the return difference between strict and flexible ESG investment mandates.
| Original language | English |
|---|---|
| Publication date | 2022 |
| Publication status | Published - 2022 |
| Event | The 82nd Annual Meeting of American Finance Association. AFA 2022: Part of the ASSA 2022 Virtual Annual Meeting - , WWW Duration: 7 Jan 2022 → 9 Jan 2022 Conference number: 82 https://www.aeaweb.org/conference/ |
Conference
| Conference | The 82nd Annual Meeting of American Finance Association. AFA 2022 |
|---|---|
| Number | 82 |
| Country/Territory | WWW |
| Period | 07/01/2022 → 09/01/2022 |
| Internet address |