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How Norway’s sovereign wealth fund negative screening affects firms’ value and behaviour

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  • Khalil Al Ayoubi
  • Geoffroy Enjolras

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)

Abstract

This paper examines the impact of negative screening by responsible sovereign wealth funds on the value of excluded firms. We focus on the main sovereign wealth fund, the Government Pension Fund Global of Norway, which excluded 149 firms from its portfolio during the period 2006–2018. Using an event study methodology, we document a significant decrease in excluded firms’ stock prices. Moreover, we find that the nature of screening matters: norm‐based exclusions suffer from a significant and permanent decrease in their stock value, suggesting that market participants reacted to the Government Pension Fund Global of Norway exclusions. Overall, it can be asserted that the Norwegian fund has a strong signalling effect on financial markets, in terms of social and environmental information. We conclude that sovereign wealth funds could be used by governments as investment vehicles in order to promote responsible investments on a large scale.
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Suggested Citation

  • Khalil Al Ayoubi & Geoffroy Enjolras, 2021. "How Norway’s sovereign wealth fund negative screening affects firms’ value and behaviour," Post-Print hal-03982960, HAL.
    • Handle: RePEc:hal:journl:hal-03982960
    DOI: 10.1111/beer.12314
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    Cited by:

    1. Luc Meunier & Sophie Richit, 2023. "Testing four nudges in socially responsible investments: Default winner by inertia," Post-Print hal-04325247, HAL.
    2. Banerjee, Rhythm, 2024. "Shifting Tides: the Effect of Institutional Divestments on the Global Market," MPRA Paper 121922, University Library of Munich, Germany, revised 11 Apr 2024.
    3. PASCOAL Fabian Buddy & JUWANA Hikmahanto & KARUNIASA Mahawan & DJOJOKUSUMO Himawan Hariyoga, 2023. "Sovereign Esg Integration: A Bibliometric And Systematic Literature Review," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 18(1), pages 231-260, April.

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