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State Pension Funds and Corporate Social Responsibility: Do Beneficiaries’ Political Values Influence Funds’ Investment Decisions?

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  • Andreas G. F. Hoepner

    (University College Dublin
    Stockholm School of Economics)

  • Lisa Schopohl

    (Henley Business School, University of Reading)

Abstract

This study explores the underlying drivers of US public pension funds’ tendency to tilt their portfolios towards companies with stronger corporate social responsibility (CSR). Studying the equity holdings of large, internally managed US state pension funds, we find evidence that the political leaning of their beneficiaries and political pressures by state politicians affect funds’ investment decisions. State pension funds from states with Democratic-leaning beneficiaries tilt their portfolios more strongly towards companies that perform well on CSR issues, and this tendency is intensified when the state government is dominated by Democratic state politicians. Moreover, we find that funds which tilt their portfolios towards companies with superior CSR scores generate a slightly higher return compared with their counterparts. Overall, our findings indicate that funds align their investment choices with the financial and non-financial interests of their beneficiaries when deciding whether to incorporate CSR into their equity allocations.

Suggested Citation

  • Andreas G. F. Hoepner & Lisa Schopohl, 2020. "State Pension Funds and Corporate Social Responsibility: Do Beneficiaries’ Political Values Influence Funds’ Investment Decisions?," Journal of Business Ethics, Springer, vol. 165(3), pages 489-516, September.
    • Handle: RePEc:kap:jbuset:v:165:y:2020:i:3:d:10.1007_s10551-018-4091-z
    DOI: 10.1007/s10551-018-4091-z
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    More about this item

    Keywords

    Corporate social responsibility; CSR; Fiduciary duty; Political values; Portfolio decisions; State pension funds; Socially responsible investing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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