Does Socially Responsible Investing Change Firm Behavior?*

Davidson Heath, Daniele Macciocchi, Roni Michaely and Matthew Ringgenberg

Review of Finance, 2023, vol. 27, issue 6, 2057-2083

Abstract: Using micro-level data, we examine the behavior of socially responsible investment (SRI) funds. SRI funds select firms with lower pollution, more board diversity, higher employee satisfaction, and better workplace safety. Yet, both in the cross-section and using an exogenous shock to SRI capital, we find that SRI funds do not significantly change firm behavior. Moreover, we find little evidence that they try to impact firm behavior using shareholder proposals. Our results suggest that SRI funds are not greenwashing, but they are impact washing; they invest in a portfolio of firms with better environmental and social conduct but do not follow through on their promise of impact.

Keywords: Corporate social responsibility (CSR); environmental; social; and governance (ESG); institutional investors; socially responsible investing (SRI) (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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