Social and Behavioral Sciences Commons^™

Institutional Investors And Corporate Environmental, Social, And Governance Policies: Evidence From Toxics Release Data, Incheol Kim, Hong Wan, Bin Wang, Tina Yang

Economics and Finance Faculty Publications and Presentations

This paper studies the role of institutional investors in influencing corporate environmental, social, and governance (ESG) policies by analyzing the relation between institutional ownership and toxic release from facilities to which institutions are geographically proximate. We develop a local preference hypothesis based on the delegated philanthropy and transaction-costs theories. Consistent with the hypothesis, local institutional ownership is negatively related to facility toxic release. The negative relation is stronger for local socially responsible investing (SRI) funds, local public pension funds, and local dedicated institutions. We also find that the relation is more negative in communities that prefer more stringent environmental policies …