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Walk the talk: ESG mutual fund voting on shareholder proposals

Author

Listed:
  • Shane S. Dikolli

    (University of Virginia Darden School of Business)

  • Mary Margaret Frank

    (University of Virginia Darden School of Business)

  • Zhe Michael Guo

    (Fordham University Gabelli School of Business)

  • Luann J. Lynch

    (University of Virginia Darden School of Business)

Abstract

We document that U.S. mutual funds with investment objectives designated as “Sustainable Investment Overall” by Morningstar (ESG funds) are more likely than other mutual funds to vote in support of environmental and social (ES) shareholder proposals and governance (G) shareholder proposals. We also find that the higher support for ES proposals by ESG funds relative to other funds is more pronounced in index funds than in active funds, consistent with trading constraints influencing voting behavior. While these results provide evidence that ESG funds “walk the talk” with their voting behavior on average, we find that fund families play a significant role in that walk. Additionally, in an analysis of fund families that are signatories of the United Nations Principles for Responsible Investment (PRI), we find that ESG funds of PRI families are significantly more likely to support ES proposals and G proposals than non-ESG funds of PRI families. We determine that this significant difference stems from non-ESG funds of PRI families providing less support than non-ESG funds from non-PRI families. Taken together, these results provide evidence that ESG funds available to U.S. investors provide more support for shareholder proposals aligned with their designated investment objective, but the type and family of the fund influence that support.

Suggested Citation

  • Shane S. Dikolli & Mary Margaret Frank & Zhe Michael Guo & Luann J. Lynch, 2022. "Walk the talk: ESG mutual fund voting on shareholder proposals," Review of Accounting Studies, Springer, vol. 27(3), pages 864-896, September.
    • Handle: RePEc:spr:reaccs:v:27:y:2022:i:3:d:10.1007_s11142-022-09692-2
    DOI: 10.1007/s11142-022-09692-2
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    References listed on IDEAS

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    1. Ertimur, Yonca & Ferri, Fabrizio & Stubben, Stephen R., 2010. "Board of directors' responsiveness to shareholders: Evidence from shareholder proposals," Journal of Corporate Finance, Elsevier, vol. 16(1), pages 53-72, February.
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    Cited by:

    1. Wang, Liang & Qi, Jiahan & Zhuang, Hongyu, 2023. "Monitoring or Collusion? Multiple Large Shareholders and Corporate ESG Performance: Evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    2. Yujuan Wu & Jacquline Tham, 2023. "The Impact of Executive Green Incentives and Top Management Team Characteristics on Corporate Value in China: The Mediating Role of Environment, Social and Government Performance," Sustainability, MDPI, vol. 15(16), pages 1-23, August.
    3. Davidson Heath & Daniele Macciocchi & Roni Michaely & Matthew C. Ringgenberg, 2023. "Does Socially Responsible Investing Change Firm Behavior?," Review of Finance, European Finance Association, vol. 27(6), pages 2057-2083.

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    More about this item

    Keywords

    ESG; Mutual funds; Sustainability; Shareholder proposals; Proxy voting;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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