Do Investors Really Care? Measuring the Effect of Institutional Investors on the Relationship Between Scope of ESG Disclosure and ESG Performance

Abstract

I investigate whether institutional investors significantly affect the relationship between ESG (environmental, social governance) disclosure and ESG performance. Corporate sustainability, as a trait that institutional investors consider, has been a hotly talked about subject as different institutional investors, like Blackrock, have released increasingly public statements about sustainability being a core part of their investment criteria, and that climate risk is investment risk. That being said, while there is ample literature suggesting that institutional investor presence increases sustainability disclosures made by the companies, and the positive association between sustainability disclosure and sustainability performance, there is a lack of literature considering all three factors together. With my senior thesis, I examine the possibilities of whether corporations simply increase disclosure to be able to receive more funding or if institutional investors are able to have a positive effect on the link between sustainability disclosure and sustainability performance. This thesis follows methodologies in previous literature using sample sets from Thomson Reuters and the Russell 3000 index and measuring correlation using the MSCI KLD data set for sustainability performance and the Bloomberg scores for scope of sustainability disclosure.