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Green Tilts

Author

Listed:
  • Lubos Pastor
  • Robert F. Stambaugh
  • Lucian A. Taylor

Abstract

We estimate financial institutions’ portfolio tilts that relate to stocks’ environmental, social, and governance (ESG) characteristics. In 2021, ESG-related tilts total 6% of the investment industry’s assets and average 22% of institutions’ total portfolio tilts. ESG tilts are larger for less-volatile stocks and for institutions with smaller size and greater active share, consistent with our theoretical predictions. 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. UNPRI signatories and European institutions tilt greener, banks browner.

Suggested Citation

  • Lubos Pastor & Robert F. Stambaugh & Lucian A. Taylor, 2023. "Green Tilts," NBER Working Papers 31320, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31320
    Note: AP CF
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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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