Does Socially Responsible Investing Change Firm Behavior?
78 Pages Posted: 5 May 2021 Last revised: 6 Feb 2022
Date Written: January 30, 2022
Using novel micro-level data, we examine the impact of socially responsible investment (SRI) funds on corporate behavior. SRI funds select firms that pollute less, have greater board diversity, higher employee satisfaction, and higher workplace safety. Yet, both in the broad cross-section and using an exogenous shock to SRI capital, we find no evidence that SRI funds improve firm behavior. The results suggest SRI funds operate through a selection effect, not a treatment effect: SRI funds invest in a portfolio consistent with the fund's objective, but they do not significantly improve corporate conduct.
Keywords: Environmental, Social, and Governance (ESG), Institutional Investing, Socially Responsible Investing (SRI), Impact Investing, Sustainability.
JEL Classification: G12, G14
Suggested Citation: Suggested Citation