Red versus Blue: Do Political Dimensions Influence the Investment Preferences of State Pension Funds?

Andreas Hoepner and Lisa Schopohl
Additional contact information
Andreas Hoepner: ICMA Centre, Henley Business School, University of Reading;
Lisa Schopohl: ICMA Centre, Henley Business School, University of Reading;

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: Studying the equity holdings of 31 U.S. state pension funds, we find evidence that the political leaning of their members and political pressures by state politicians impact funds' investment decisions. State pension funds from states with Democratic leaning members tend to tilt their portfolios more strongly towards companies that perform well on environmental, social and governance (ESG) issues, as compared to their Republican counterparts. This tendency is especially strong if the majority of the state government are Democrats. State pension funds intensify their ESG investing when their members' political leaning changes from Republican to Democratic, and vice versa, suggesting that these funds align their ESG investment approach with the political leaning of their members. Finally, we find that the state pension funds in our sample neither under- nor outperform on their politically-motivated ESG holdings, implying that their ESG preferences are unlikely financially-driven.

Keywords: ESG; political pressures; political values; portfolio decisions; state pension funds; SRI (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-age, nep-cdm and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.icmacentre.ac.uk/images/2015/11/ICM-2015-08-Hoepner-and-Schopohl.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rdg:icmadp:icma-dp2015-06

Access Statistics for this paper

More papers in ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading Contact information at EDIRC.
Bibliographic data for series maintained by Marie Pearson (marie.pearson@henley.ac.uk).