Who Owns (Un)sustainable Companies?

Why do investors allocate more to (un)sustainable firms?

Jan Anton van Zanten and Bruno Rein show that there is much variety in the extent to which investors own sustainable and unsustainable companies in their article « Who owns (un)sustainable companies? Examining institutional determinants of sustainable investing ».

They show that:

• Investors involved in sustainable investment initiatives like the Principles for Responsible Investment or Net Zero alliances do not tend to invest more sustainably than investors who do not commit to such initiatives.
• Investors facing more normative pressure, such as pension funds, have lower ownership of unsustainable firms compared to investors that experience less normative pressure, such as hedge funds.
• Investors from countries with limited commitment to the SDGs invest more in unsustainable firms, while those from more ESG-developed nations invest more in sustainable companies.
• Investors from less developed countries are more likely to invest in unsustainable companies that support social goals but cause significant environmental harm.

The study offers useful information for institutional investors, highlighting the influence of a country's sustainable investing practices on the ownership of sustainable and unsustainable companies.

This article provides valuable insights into the institutional determinants of sustainable investing. It would be interesting to further investigate the potential impact of regulatory initiatives on institutional investors' ownership of sustainable companies.