Corporate ESG Profiles and Investor Horizons

Abstract

corporate esg profiles and investor horizons laura starks mccombs school of business, ut austin parth venkat u.s. securities and exchange commission qifei zhu nanyang business school – nanyang technological university presentation for the principles of responsible investing the securities and exchange commission disclaims responsibility for any private publication or statement of any sec employee or commissioner. this article expresses the authors views and does not necessarily reflect those of the commission, the commissioners, or other members of the staff. institutional investors may prefer firms w/ better environmental, social and governance profiles? • firm esg profiles can: – attract more or higher paying customers (baron) – increase employee productivity (baron, benabou & tirole) – decrease firm risk (albuquerque et al) – reduce litigation risk (eccles, ioannou, and serafeim) – help managers avoid myopic decisions • benabou and tirole (2010) long term horizons • over the long-term, esg issues - ranging from climate change to diversity to board effectiveness - have real and quantifiable financial impacts. - larry fink, ceo, blackrock • bolton, scheinkman, and xiong: model short-term investors can encourage managers to boost short-term earnings, even at the expense of long-term value • froot, perold and stein: short-term investors may learn more from day-to-day trading and know less about longterm projects hypotheses tested • is there a relation between investor horizon …

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