How Norway’s sovereign wealth fund negative screening affects firms’ value and behaviour

Khalil Al Ayoubi and Geoffroy Enjolras
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Khalil Al Ayoubi: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes

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Abstract: This paper examines the impact of negative screening by responsible sovereign wealth funds on the value of excluded firms. We focus on the main sovereign wealth fund, the Government Pension Fund Global of Norway, which excluded 149 firms from its portfolio during the period 2006–2018. Using an event study methodology, we document a significant decrease in excluded firms' stock prices. Moreover, we find that the nature of screening matters: norm‐based exclusions suffer from a significant and permanent decrease in their stock value, suggesting that market participants reacted to the Government Pension Fund Global of Norway exclusions. Overall, it can be asserted that the Norwegian fund has a strong signalling effect on financial markets, in terms of social and environmental information. We conclude that sovereign wealth funds could be used by governments as investment vehicles in order to promote responsible investments on a large scale.

Date: 2021-01
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Citations: View citations in EconPapers (3)

Published in Business ethics, the environment & responsibility, 2021, 30 (1), pp.19-37. ⟨10.1111/beer.12314⟩

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Journal Article: How Norway’s sovereign wealth fund negative screening affects firms’ value and behaviour (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03982960

DOI: 10.1111/beer.12314

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