ESG Issues among Fund Managers—Factors and Motives

Justyna Przychodzen, Fernando Gómez-Bezares, Wojciech Przychodzen and Mikel Larreina
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Justyna Przychodzen: Laureate Online Education, University of Liverpool Online Management Programmes, 1101 BH Amsterdam, The Netherlands
Fernando Gómez-Bezares: Deusto Business School, University of Deusto, Avda de las Universidades 24, 48007 Bilbao, Spain
Wojciech Przychodzen: Deusto Business School, University of Deusto, Avda de las Universidades 24, 48007 Bilbao, Spain

Sustainability, 2016, vol. 8, issue 10, 1-19

Abstract: This paper investigates the motives, behavior, and characteristics shaping mutual fund managers’ willingness to incorporate Environmental, Social and Governance (ESG) issues into investment decision making. Using survey evidence from fund managers from five different countries, we demonstrate that this predisposition is the stronger, the shorter their average forecasting horizon and the higher their level of reliance on business risk in portfolio management is. We also find that the propensity to incorporate ESG factors is positively related to an increasing level of risk aversion, an increasing importance of salary change and senior management approval/disapproval as motivating factors as well as length of professional experience in current fund and increasing significance of assessment by superiors in remuneration. Overall, our evidence suggests that ESG diligence among fund managers serves mainly as a method for mitigating risk and is typically motivated by herding; it is much less important as a tool for additional value creation. The prevalent use of ESG criteria in mitigating risk is in contrast with traditional approach, but it is in line with behavioral finance theory. Additionally, our results also show a strong difference in the length of the forecasting horizon between continental European and Anglo-Saxon fund managers.

Keywords: fund managers; institutional investors; ESG investing; investment behavior; behavioral finance; asset management; survey (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:8:y:2016:i:10:p:1078-:d:81238

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