Responsible Investors: Who They Are, What They Want
Originally appeared in the Journal of Applied Corporate Finance (Vol. 25, No. 3, Summer 2013) from the Simon School of Business at University of Rochester
Responsible investors in increasing numbers are asking corporations to disclose data on their environmental, social, and governance policies and practices. These investors put this data to use in analyzing companies' financial prospects, assessing stakeholder relations (and the potential risks and rewards associated with them), making buy-sell decisions, and, when necessary, engaging with management as owners. Such investors also seek to identify companies where management has invested in credible and effective environmental, social and governance (ESG) initiatives that, broadly speaking, aim to create environmental and societal value.
Who are these investors? What types of ESG initiatives to they expect corporate managers to create, monitor, and report on? Will companies whose managers invest in such initiatives be rewarded in the marketplace? These are the kinds of questions this paper seeks to answer...