New Research Project to Examine the Evolution of ESG Preferences of Large Institutional Investors
Professor Rüdiger Fahlenbrach (Ecole Polytechnique Federale de Lausanne, Swiss Finance Institute, and ECGI), PhD student Maxime Couvert (Ecole Polytechnique Federale de Lausanne, Swiss Finance Institute) and their co-principal investigators Zacharias Sautner (Frankfurt School of Finance & Management and ECGI) and Alexander Wagner (University of Zürich and ECGI) have obtained funding from the prestigious Norwegian Finance Initiative (NFI) Research Programme under the call “Changing Ownership Structure and its Implications for Corporate Governance”.
The objective of the project is to understand the evolution of the preferences of large institutional investors with respect to environmental, social, and governance (ESG) issues through the analysis of proxy-voting guidelines and the responses to large-scale surveys. Overall, the project will yield new and important insights into (i) how institutional investors shape and use one of their main governance vehicles, voting at annual general meetings, (ii) what influence they have through it on portfolio firms, and ultimately, (iii) how their stewardship activities carry over into the performance of their investment vehicles.
The project contributes to our understanding of how ownership structures affect companies’ governance, corporate decision-making, and long-term performance, and how institutional investors can affect corporate governance at scale. The design of proxy voting guidelines and the subsequent voting at annual general meetings is a core stewardship activity of institutional investors. Further, proxy-voting guidelines could deliver important scaling effects as well as externalities across institutions and firms. Through the large proxy-voting guidelines sample and the survey responses, covering both a large cross-section and a large time-series, we can gain new insights into how institutional investors form stewardship philosophies, and whether effective stewardship policies can influence the behavior of portfolio firms.
The objective of the NFI Research Programme is to facilitate for financial economic research of the highest academic standard in areas of particular relevance for the long-term management of the Norwegian Government Pension Fund Global (GPFG). The NFI Research Programme reflects the Executive Board of Norges Bank’s commitment to strengthen the scientific foundation of the management of the fund. The list of previous grantees consists of professors from Columbia University, Harvard University, London Business School, New York University, and Stanford University.
The European Corporate Governance Institute (ECGI) is also a recipient of a grant under the same tender, to deliver a collection of research on the topic of Covid-19 and Corporations.