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  • 2017
  • Working Paper
  • HBS Working Paper Series

Why and How Investors Use ESG Information: Evidence from a Global Survey

By: Georgios Serafeim
  • Format:Print
  • | Language:English
  • | Pages:50
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Abstract

Using survey data from a sample of senior investment professionals from mainstream (i.e., not SRI funds) investment organizations, we provide insights into why and how investors use reported environmental, social, and governance (ESG) information. The primary reason survey respondents consider ESG information in investment decisions is because they consider it financially material to investment performance. ESG information is perceived to provide information primarily about risk rather than a company’s competitive positioning. There is no one size fits all, with the financial materiality of different ESG issues varying across sectors. Lack of comparability due to the lack of reporting standards is the primary impediment to the use of ESG information. Most frequently, the information is used to screen companies, with the most often used method being negative screening. However, negative screening is perceived as the least beneficial investment while full integration into stock valuation and positive screening are considered more beneficial. Respondents expect negative screening to be used less in the future, while positive screening and active ownership to be used more.

Keywords

Investment Management; Sustainability; ESG; ESG (Environmental, Social, Governance) Performance; Investment Fund; Investment Strategy; Corporate Accountability; Activist Shareholder; Engagement; Environment; Climate Change; Customers; Customer Satisfaction; Employee Engagement; Global Warming; Investment; Decision Making; Environmental Sustainability; Performance Expectations

Citation

Serafeim, Georgios. "Why and How Investors Use ESG Information: Evidence from a Global Survey." Harvard Business School Working Paper, No. 17-079, February 2017.
  • SSRN

About The Author

George Serafeim

Accounting and Management
→More Publications

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More from the Author
  • Vytal: Packaging-as-a-Service By: George Serafeim, Michael W. Toffel and Stacy Straaberg
  • Northvolt: Building Batteries to Fight Climate Change (B) By: George Serafeim, Debora L. Spar, Peter Tufano, Hugo Etchegoyhen and Emilie Billaud
  • Climate Solutions, Transition Risk, and Stock Returns By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim
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