The Sustainability Footprint of Institutional Investors

Rajna Gibson and Philipp Krueger
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Rajna Gibson: University of Geneva and Swiss Finance Institute

No 17-05, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Institutional investors are the single most important class of shareholders in stock markets. Yet, knowledge about their motivations for embedding environmental and social — or more generally — sustainability considerations in their portfolio allocations is at best emerging. In this paper, we propose a novel approach to measure the environmental, social, and aggregate sustainability footprint at the institutional investor portfolio-level. We provide evidence that institutional investors with longer investment horizons — as measured by investors’ legal type or portfolio turnover — exhibit significantly better sustainability footprints. We also document that institutional investors with better sustainability footprints generate higher risk-adjusted performance, primarily through a reduction of portfolio risk. Overall, our results are consistent with the view that institutional investors choose sustainability oriented portfolio allocations with the objective of long-term value maximization.

Keywords: Investment horizon; Institutional investors; sustainability footprint; portfolio turnover; risk-adjusted performance; CSR; ESG impact; SRI; sustainable investing; impact investing; environmental footprint; social footprint (search for similar items in EconPapers)
JEL-codes: G20 G23 G30 M14 Q01 Q50 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-02
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1705

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