The value of a Principles for Responsible Investing designation: A setting for environmental social and governance natural experiments

Dan Daugaard ()
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Dan Daugaard: Tasmanian School of Business and Economics, University of Tasmania., https://discover.utas.edu.au/Dan.Daugaard

No 2024-03, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: Fund flows determine assets under management and are therefore highly valued by investment managers. This article is concerned with whether the United Nation’s Principles for Responsible Investing (PRI) can drive fund flows towards socially responsible investing (SRI) funds. If so, signing the PRI will be highly valued by investment managers are enable the PRI to influence investment practices and create a sustainable financial system. There are significant endogeneity issues encountered in fund flow analysis, so innovative techniques are necessary. Natural experiments are considered the “gold standard†for addressing endogeneity problems. SRI fund flows are an ideal context for creating natural experiments using environmental, social and governance (ESG) events. Unfortunately, the results from these experiments raise doubts about the ability of the PRI to influence SRI fund flows. This outcome questions the value of signing the PRI for investment managers and implies the PRI has limited scope to contribute to sustainable developments.

Keywords: fund flows; ESG; SRI; sustainable finance (search for similar items in EconPapers)
Pages: 37 pages
Date: 2024
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Published by the University of Tasmania. Discussion paper 2024-03

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