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Green tilts

Author

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  • Pastor, Lubos
  • Stambaugh, Robert F.
  • Taylor, Lucian A.

Abstract

We estimate financial institutions’ portfolio tilts related to U.S. stocks’ environmental, social, and governance (ESG) characteristics. From 2012 to 2023, ESG-related tilts consistently total about 6% of the investment industry’s assets and rise from 17% to 27% of institutions’ total portfolio tilts. Significant ESG tilts arise from the choice of stocks held and, especially, the weights on stocks held. The largest institutions tilt increasingly toward green stocks, while other institutions and households tilt increasingly brown. Divestment from brown stocks is typically partial rather than full, even for individual mutual funds. UNPRI signatories and European institutions tilt greener; banks tilt browner.

Suggested Citation

  • Pastor, Lubos & Stambaugh, Robert F. & Taylor, Lucian A., 2025. "Green tilts," Journal of Financial Economics, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:jfinec:v:174:y:2025:i:c:s0304405x25001813
    DOI: 10.1016/j.jfineco.2025.104173
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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