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ESG Issues among Fund Managers—Factors and Motives

Author

Listed:
  • Justyna Przychodzen

    () (Laureate Online Education, University of Liverpool Online Management Programmes, 1101 BH Amsterdam, The Netherlands)

  • Fernando Gómez-Bezares

    () (Deusto Business School, University of Deusto, Avda de las Universidades 24, 48007 Bilbao, Spain)

  • Wojciech Przychodzen

    () (Deusto Business School, University of Deusto, Avda de las Universidades 24, 48007 Bilbao, Spain)

  • Mikel Larreina

    () (Deusto Business School, University of Deusto, Avda de las Universidades 24, 48007 Bilbao, Spain)

Abstract

This paper investigates the motives, behavior, and characteristics shaping mutual fund managers’ willingness to incorporate Environmental, Social and Governance (ESG) issues into investment decision making. Using survey evidence from fund managers from five different countries, we demonstrate that this predisposition is the stronger, the shorter their average forecasting horizon and the higher their level of reliance on business risk in portfolio management is. We also find that the propensity to incorporate ESG factors is positively related to an increasing level of risk aversion, an increasing importance of salary change and senior management approval/disapproval as motivating factors as well as length of professional experience in current fund and increasing significance of assessment by superiors in remuneration. Overall, our evidence suggests that ESG diligence among fund managers serves mainly as a method for mitigating risk and is typically motivated by herding; it is much less important as a tool for additional value creation. The prevalent use of ESG criteria in mitigating risk is in contrast with traditional approach, but it is in line with behavioral finance theory. Additionally, our results also show a strong difference in the length of the forecasting horizon between continental European and Anglo-Saxon fund managers.

Suggested Citation

  • Justyna Przychodzen & Fernando Gómez-Bezares & Wojciech Przychodzen & Mikel Larreina, 2016. "ESG Issues among Fund Managers—Factors and Motives," Sustainability, MDPI, Open Access Journal, vol. 8(10), pages 1-19, October.
  • Handle: RePEc:gam:jsusta:v:8:y:2016:i:10:p:1078-:d:81238
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    References listed on IDEAS

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    Cited by:

    1. Sayema Sultana & Norhayah Zulkifli & Dalilawati Zainal, 2018. "Environmental, Social and Governance (ESG) and Investment Decision in Bangladesh," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-19, June.
    2. Gaurav Talan & Gagan Deep Sharma, 2019. "Doing Well by Doing Good: A Systematic Review and Research Agenda for Sustainable Investment," Sustainability, MDPI, Open Access Journal, vol. 11(2), pages 1-16, January.
    3. Federica Ielasi & Monica Rossolini, 2019. "Responsible or Thematic? The True Nature of Sustainability-Themed Mutual Funds," Sustainability, MDPI, Open Access Journal, vol. 11(12), pages 1-17, June.
    4. Shu Ling Lin & Jun Lu & Jung-Bin Su & Wei-Peng Chen, 2018. "Sustainable Returns: The Effect of Regional Industrial Development Policy on Institutional Investors’ Behavior in China," Sustainability, MDPI, Open Access Journal, vol. 10(8), pages 1-28, August.
    5. Oscar V. De la Torre-Torres & Evaristo Galeana-Figueroa & José Álvarez-García, 2018. "Efficiency of the Public Pensions Funds on the Socially Responsible Equities of Mexico," Sustainability, MDPI, Open Access Journal, vol. 11(1), pages 1-18, December.
    6. Jesús Valero-Gil & Pilar Rivera-Torres & Conchita Garcés-Ayerbe, 2017. "How Is Environmental Proactivity Accomplished? Drivers and Barriers in Firms’ Pro-Environmental Change Process," Sustainability, MDPI, Open Access Journal, vol. 9(8), pages 1-15, July.
    7. Ga-Young Jang & Hyoung-Goo Kang & Ju-Yeong Lee & Kyounghun Bae, 2020. "ESG Scores and the Credit Market," Sustainability, MDPI, Open Access Journal, vol. 12(8), pages 1-1, April.
    8. Min Xue & Francis Boadu & Yu Xie, 2019. "The Penetration of Green Innovation on Firm Performance: Effects of Absorptive Capacity and Managerial Environmental Concern," Sustainability, MDPI, Open Access Journal, vol. 11(9), pages 1-24, April.
    9. Federica Ielasi & Paolo Ceccherini & Pietro Zito, 2020. "Integrating ESG Analysis into Smart Beta Strategies," Sustainability, MDPI, Open Access Journal, vol. 12(22), pages 1-1, November.
    10. Estibaliz Goicoechea & Fernando Gómez-Bezares & José Vicente Ugarte, 2019. "Integrated Reporting Assurance: Perceptions of Auditors and Users in Spain," Sustainability, MDPI, Open Access Journal, vol. 11(3), pages 1-19, January.

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    More about this item

    Keywords

    fund managers; institutional investors; ESG investing; investment behavior; behavioral finance; asset management; survey;
    All these keywords.

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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