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Sustainable Investing Home and Abroad

Author

Listed:
  • Ines Chaieb

    (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute)

  • Vihang R. Errunza

    (McGill University - Desautels Faculty of Management)

  • Lucie Y. Lu

    (University of Melbourne, Faculty of Business and Economics)

Abstract

We study how firm ESG performance affects domestic and foreign institutional investments. At the firm level, the marginal effects of ESG on institutional ownership vary across institution origin and investment destination countries. At the institution-firm level, institutions tilt towards high-ESG firms only when they are domestic. We term this asymmetry in ESG preference between domestic and foreign investment the "ESG home bias". We explore ESG information environment, country E&S awareness, and ESG factor discount as potential economic mechanisms and find that the ESG home bias reflects a combination of these factors, the most important being information asymmetry about the ESG outcome measured by ESG uncertainty.

Suggested Citation

  • Ines Chaieb & Vihang R. Errunza & Lucie Y. Lu, 2024. "Sustainable Investing Home and Abroad," Swiss Finance Institute Research Paper Series 24-71, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2471
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    More about this item

    Keywords

    institutional investors; international investment; ESG;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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