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Essays on institutional investment and socially responsible investing

Schopohl, L. (2017) Essays on institutional investment and socially responsible investing. PhD thesis, University of Reading

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This thesis contributes to the growing body of research on socially responsible investing (SRI) and institutional investment. Throughout the three main chapters of the thesis, I empirically investigate how institutional investors incorporate environmental, social and ethical considerations into their investment practices. First, I assess the impact of different political dimensions on the equity holdings of 31 U.S. state pension funds. I provide evidence that pension funds with Democratic leaning members tend to tilt their portfolios more strongly towards companies with higher environmental and social performance and that pressures by Democratic state politicians intensify this tendency. Additionally, I show that the sample funds neither under- nor outperform on their politically motivated SRI holdings, implying that their SRI preferences are unlikely financially-driven. Next, I investigate how Scandinavian public asset owners balance their financial and ethical objectives through exclusionary screening. I empirically analyse the performance effect of the exclusion of “unethical” companies from the portfolios of two leading Nordic investors, Norway’s Government Pension Fund-Global (GPFG) and Sweden’s AP-funds. I show that the portfolios of excluded companies do not generate an abnormal return relative to the funds’ benchmark indices, indicating that the exclusion decisions generally did not harm fund performance. Finally, I evaluate the extent to which investors account for the financial materiality of environmental and social factors in their shareholder activism. I find that a considerable amount of investor resources is spent on advancing immaterial issues through shareholder proposals. While certain “dedicated” investors such as public pension funds, endowments, religious institutions and asset managers are better at targeting financially material issues, the overall shareholder base does not differentiate between the financial materiality, or otherwise, of a proposal. Material proposals neither receive greater vote support nor does the market react more positively to learning that a company has been targeted by a material proposal.

Item Type:Thesis (PhD)
Thesis Supervisor:Hoepner, A.
Thesis/Report Department:Henley Business School
Identification Number/DOI:
Divisions:Henley Business School > ICMA Centre
ID Code:69599
Date on Title Page:2016


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