Responsible Finance
with Christian Gollier, 2022, Economica 89
Socially responsible investors constitute an important force in today's global financial markets. This paper examines conditions under which socially responsible investors induce companies to behave responsibly. We develop an asset pricing model in which some shareholders are active owners, that is, they engage companies by voting on strategic decisions. Differences of objective among shareholders arise because socially responsible investors value corporate externalities. In our baseline model, we show that a firm may choose a responsible strategy even if the majority of investors are not responsible. We also demonstrate that such a choice of a responsible strategy might be fragile because it might depend on investors' self‐fulfilling beliefs. We then extend our baseline model to analyse the link between divestment and engagement strategies, the case with multiple firms, the role of benefit corporation charters, and the impact of a large investor.
Delegated Philanthropy in Mutual Fund Votes on Climate Change Externalities
with Marie Brière, Martin Schmalz and Loredana Ureche-Rangau, 2022, in Climate Investing: New Strategies and Implementation Challenges, Edited by Emmanuel Jurczenko
This chapter studies the votes of institutional investors on shareholder resolutions instructing corporations to mitigate climate change externalities. Our sample includes 238 US fund families that voted on 14,409 different shareholder resolutions at 2,700 companies over the period from 2013 to 2016. We find that, in line with the delegated philanthropy logic, fund families that have larger proportions of responsible investments display a larger support for resolutions on climate change. This result holds i) especially for fund families with large percentage of SRI, ii) whether ISS favors or not these resolutions, iii) when these resolutions end up being close call votes, and iv) when we focus only on fund families that have voted more than 50 or 100 resolutions on environmental and social issues.
with Marie Brière and Loredana Ureche-Rangau, 2019, forthcoming Proceedings of the 7th Public Investors Conference, BIS, World Bank, Bank of Canada, Banca d'Italia
Do institutional investors engage with companies on corporate externalities such as greenhouse gas emissions? And if so, why? We study voting at shareholder meetings by two emblematic global investors: BlackRock, a major asset manager, and the Norway Fund, a responsible sovereign wealth fund. Our data cover 2014 and include the two institutions’ votes on 35,382 resolutions at 2,796 corporations across the world. Both of these so-called universal owners oppose management significantly more often on externality than on financial issues. The Norway Fund is more active on shareholder resolutions concerning externalities related to environmental and social issues rather than governance issues. The difference between the two investors’ voting behavior is larger when we focus on resolutions related to greenhouse gas emissions, a clearly identified externality. Overall, universal ownership (see, e.g., Monks and Minow, 1995) and delegated philanthropy (see, e.g., Benabou and Tirole, 2010) both appear to provide incentives for institutional investors to combat negative externalities generated by firms.
Sovereign Bond Spreads and Extra-Financial Performance: An Empirical Analysis of Emerging Markets
with Paula Margaretic, 2018, International Review of Economics and Finance 58
This paper studies the impact of a country’s extra-financial performance on its sovereign bond spreads. Sovereign bond spreads reflect both an economic default risk and a strategic default risk. We hypothesize that a country’s extra-financial performance reduces default risk by signaling good commitment ability. We test this hypothesis for the countries which bonds are included in the JP Morgan Emerging Markets Bond Index Global. Over the period from 2001 to 2010, we find that an emerging country’s average cost of capital decreases with its governance and social performance. Furthermore, we demonstrate that a good social performance signals an emerging economy’s long-term orientation and commitment to repay its debt in the future.
On the Financial Performance of Socially Responsible Investments
2014, Bankers, Markets and Investors 128
This paper discusses the fundamental drivers of the financial performance of various Socially Responsible Investment strategies, including exclusion, best-in-class, and engagement strategies.
La recommendation des fonds ISR : Une étude empirique sur les conseillers clients bancaires français
With Marco Heimann (in French), 2013, Revue Française de Gestions 236
In this chapter, we present the experimental methodology as a useful tool for scholars interested in socially responsible investments.