Sustainable Investing Home and Abroad

Ines Chaieb, Vihang R. Errunza and Lucie Y. Lu
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Ines Chaieb: University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute
Vihang R. Errunza: McGill University - Desautels Faculty of Management
Lucie Y. Lu: University of Melbourne, Faculty of Business and Economics

No 24-71, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We study how firm ESG performance affects domestic and foreign institutional investments. At the firm level, the marginal effects of ESG on institutional ownership vary across institution origin and investment destination countries. At the institution-firm level, institutions tilt towards high-ESG firms only when they are domestic. We term this asymmetry in ESG preference between domestic and foreign investment the "ESG home bias". We explore ESG information environment, country E&S awareness, and ESG factor discount as potential economic mechanisms and find that the ESG home bias reflects a combination of these factors, the most important being information asymmetry about the ESG outcome measured by ESG uncertainty.

Keywords: institutional investors; international investment; ESG (search for similar items in EconPapers)
JEL-codes: G15 G23 G32 (search for similar items in EconPapers)
Pages: 94 pages
Date: 2024-04
New Economics Papers: this item is included in nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2471

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