1 Introduction
2 Agency theory
3 Literature review and hypothesis development
3.1 Content-driven, socially responsible investors and corporate environmental performance
3.2 Time-driven, long-term investors and corporate environmental performance
3.3 Sustainable institutional investors and carbon awareness
4 Methodology
4.1 Sample selection
4.2 Socially responsible investors
4.3 Institutional investors with long-term investment horizons
4.4 Environmental performance
4.5 Control variables
Variables | Variable definition | Source |
---|---|---|
Dependent variable | ||
E_PILLAR | Environmental pillar performance score | Thomson Reuters Eikon |
RES | Resource use category score | Thomson Reuters Eikon |
INNO | Product innovation category score | Thomson Reuters Eikon |
EMS | Emissions reduction category score | Thomson Reuters Eikon |
CA | Indicator variable whether the company responds to the yearly sustainability survey by the Carbon Disclosure Project | Carbon Disclosure Project |
Explanatory variables | ||
PRI_PERCENT | Total equity owned by the firm’s largest 100 investors that are signatories to the UN PRI | Own calculation |
INV_HORIZON | Equity-weighted average of years since the initial investment in the focal company by the largest 100 investors | Own calculation |
Control variables | ||
SIZE | Natural logarithm of total assets | Thomson Reuters Eikon |
DEBT_RATIO | Debt to assets ratio | Thomson Reuters Eikon |
TANGIBILITY | Property plant and equipment divided by total assets | Thomson Reuters Eikon |
Q | Tobin’s Q is calculated as the firm’s enterprise value divided by book value of total assets | Thomson Reuters Eikon |
ROA | Return on Assets | Thomson Reuters Eikon |
VOLA | Annualized stock volatility based on daily returns over the past 250 trading days | Thomson Reuters Eikon |
ANALYST | Natural logarithm of the number of analysts following the firm | Thomson Reuters Eikon |
FREE_FLOAT | Free float as a percentage of shares outstanding | Thomson Reuters Eikon |
DJSI_EU | Indicator variable taking the value 1 if the firm is listed in the Dow Jones Sustainability Index (Europe) in the corresponding year, and 0 otherwise | RobecoSam |
BGD | Ratio of board gender diversity in percent | Thomson Reuters Eikon |
BSIZE | Board size | Thomson Reuters Eikon |
4.6 Model design
5 Empirical findings
5.1 Descriptive statistics and correlation analysis
Country of headquarters | N | Mean of | ||
---|---|---|---|---|
E_PILLAR | PRI_PERCENT | INV_HORIZON | ||
Panel A: Sample composition by county of headquarters | ||||
Austria | 170 | 47.87 | 7.02 | 7.15 |
Belgium | 269 | 42.94 | 8.73 | 8.54 |
Cyprus | 10 | 61.13 | 15.57 | 6.32 |
Czech Republic | 40 | 28.82 | 12.18 | 6.06 |
Denmark | 240 | 43.8 | 8.94 | 8.23 |
Finland | 270 | 60.67 | 12.73 | 8.34 |
France | 960 | 63.8 | 11.07 | 9 |
Germany | 889 | 53.72 | 12.67 | 7.85 |
Gibraltar | 10 | 30.63 | 10.23 | 5.56 |
Greece | 190 | 37.46 | 4.3 | 6.55 |
Guernsey | 79 | 13.17 | 28.02 | 4.35 |
Hungary | 40 | 55.56 | 11.64 | 7.97 |
Ireland; Republic of | 310 | 38.61 | 19.65 | 8.02 |
Isle of Man | 20 | 13.93 | 7.75 | 3.51 |
Italy | 449 | 46.92 | 6.65 | 7.9 |
Jersey | 40 | 27.88 | 18.48 | 4.54 |
Luxembourg | 79 | 41.78 | 6.7 | 6.98 |
Malta | 20 | 11.65 | 23.05 | 5.04 |
Netherlands | 330 | 52.91 | 12.46 | 7.23 |
Norway | 190 | 50.87 | 9.88 | 8.39 |
Poland | 249 | 26.49 | 7.54 | 6.31 |
Portugal | 100 | 62.89 | 6.41 | 7.96 |
Romania | 10 | 2.02 | 0.98 | 6.6 |
Russia | 308 | 29.8 | 1.65 | 4.22 |
Spain | 410 | 63.01 | 6.36 | 8.05 |
Sweden | 670 | 53.91 | 16.55 | 8.96 |
Switzerland | 709 | 42.85 | 11.41 | 8.04 |
Ukraine | 10 | 8.14 | 7.03 | 3.32 |
United Kingdom | 2926 | 43.93 | 33.32 | 9.15 |
Variables | N | Mean | SD | Quantiles | ||||
---|---|---|---|---|---|---|---|---|
Min | 0.25 | Median | 0.75 | Max | ||||
Panel B: Summary statistics | ||||||||
E PILLAR | 7384 | 49.85 | 27.53 | 0 | 27.71 | 51.51 | 74.2 | 98.72 |
RES | 7374 | 53.96 | 24.43 | 0 | 34.94 | 55.17 | 74.07 | 98.69 |
INNO | 7290 | 54.09 | 24.4 | 0 | 35.06 | 55.35 | 74.21 | 98.69 |
EMS | 7384 | 53.93 | 24.44 | 0 | 34.9 | 55.15 | 74.05 | 98.69 |
CA | 5714 | 0.73 | 0.44 | 0 | 0 | 1 | 1 | 1 |
PRI_PERCENT | 7384 | 17.93 | 17.24 | 0 | 5.07 | 12.19 | 26.13 | 96.75 |
INV_HORIZON | 7384 | 8.25 | 3.47 | 0 | 5.72 | 8.34 | 10.76 | 18.26 |
SIZE | 7384 | 22.61 | 1.86 | 14.27 | 21.32 | 22.38 | 23.76 | 28.55 |
DEBT_RATIO | 7384 | 0.24 | 0.18 | 0 | 0.11 | 0.22 | 0.34 | 2.45 |
TANGIBILITY | 7384 | 0.23 | 0.23 | −0.23 | 0.03 | 0.16 | 0.36 | 1.16 |
Q | 7384 | 1.19 | 2.04 | −1.03 | 0.56 | 0.87 | 1.36 | 90.07 |
ROA | 7384 | 4.54 | 7.46 | −27.93 | 0.84 | 3.9 | 7.68 | 32.66 |
VOLA | 7384 | 0.36 | 0.19 | 0.05 | 0.24 | 0.3 | 0.41 | 2.77 |
ANALYST | 7384 | 2.65 | 0.77 | 0 | 2.3 | 2.83 | 3.18 | 3.99 |
FREE_FLOAT | 7384 | 74.95 | 25.11 | 0.1 | 54.56 | 84.02 | 97.69 | 100 |
DJSI_EU | 7384 | 0.13 | 0.33 | 0 | 0 | 0 | 0 | 1 |
BGD | 7384 | 17 | 12.85 | 0 | 7.69 | 16.26 | 25 | 66.67 |
BSIZE | 7384 | 11.07 | 4.19 | 1 | 8 | 10 | 13 | 38 |
Variables | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) | (14) | (15) | (16) | (17) | (18) | (19) |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) E_PILLAR | 1.00 | ||||||||||||||||||
(2) RES | 0.86 | 0.74 | 1.00 | ||||||||||||||||
(3) INNO | 0.73 | 0.47 | 0.45 | 1.00 | |||||||||||||||
(4) EMS | 0.85 | 0.69 | 0.78 | 0.43 | 1.00 | ||||||||||||||
(5) CA | 0.50 | 0.48 | 0.49 | 0.33 | 0.49 | 1.00 | |||||||||||||
(6) PRI_PERCENT | −0.08 | −0.04 | −0.05 | −0.09 | −0.05 | 0.12 | 1.00 | ||||||||||||
(7) INV_HORIZON | 0.23 | 0.28 | 0.23 | 0.17 | 0.23 | 0.27 | 0.23 | 1.00 | |||||||||||
(8) SIZE | 0.47 | 0.44 | 0.44 | 0.40 | 0.45 | 0.23 | −0.28 | 0.12 | 1.00 | ||||||||||
(9) DEBT_RATIO | 0.07 | 0.05 | 0.03 | −0.03 | 0.07 | 0.00 | 0.03 | −0.02 | 0.01 | 1.00 | |||||||||
(10) TANGIBILITY | 0.07 | 0.01 | 0.02 | −0.06 | 0.07 | −0.02 | −0.12 | −0.06 | −0.12 | 0.19 | 1.00 | ||||||||
(11) Q | −0.08 | −0.06 | −0.05 | −0.09 | −0.07 | −0.01 | 0.07 | 0.00 | −0.26 | −0.06 | −0.01 | 1.00 | |||||||
(12) ROA | −0.08 | −0.05 | −0.05 | −0.11 | −0.06 | −0.01 | 0.10 | 0.05 | −0.29 | −0.18 | −0.00 | 0.41 | 1.00 | ||||||
(13) VOLA | −0.10 | −0.12 | −0.09 | −0.05 | −0.11 | −0.16 | −0.05 | −0.27 | −0.03 | 0.03 | 0.03 | −0.08 | −0.27 | 1.00 | |||||
(14) ANALYST | 0.43 | 0.45 | 0.42 | 0.30 | 0.41 | 0.33 | −0.03 | 0.17 | 0.42 | −0.02 | −0.00 | 0.03 | 0.03 | −0.16 | 1.00 | ||||
(15) FREE_FLOAT | 0.05 | 0.08 | 0.06 | 0.05 | 0.02 | 0.20 | 0.50 | 0.10 | −0.04 | −0.00 | −0.19 | 0.05 | 0.06 | −0.11 | 0.18 | 1.00 | |||
(16) DJSI_EU | 0.37 | 0.41 | 0.37 | 0.29 | 0.35 | 0.25 | −0.03 | 0.14 | 0.36 | 0.02 | −0.07 | −0.03 | −0.02 | −0.10 | 0.33 | 0.10 | 1.00 | ||
(17) BGD | 0.27 | 0.31 | 0.28 | 0.20 | 0.28 | 0.25 | 0.03 | 0.29 | 0.18 | 0.01 | −0.11 | 0.05 | 0.02 | −0.13 | 0.21 | 0.12 | 0.14 | 1.00 | |
(19) BSIZE | 0.34 | 0.31 | 0.31 | 0.28 | 0.34 | 0.14 | −0.28 | 0.04 | 0.55 | 0.01 | −0.04 | −0.12 | −0.16 | −0.02 | 0.28 | −0.19 | 0.18 | 0.07 | 1.00 |
5.2 Regression results
Variables | (Model 1) | (Model 2) | (Model 3) | (Model 4) | (Model 5) | (Model 6) |
---|---|---|---|---|---|---|
PRI_PERCENT | 0.072*** | 0.117*** | 0.101*** | |||
(0.017) | (0.016) | (0.019) | ||||
INV_HORIZON | 0.824*** | 0.675*** | 0.361*** | |||
(0.089) | (0.086) | (0.090) | ||||
SIZE | 4.119*** | 6.778*** | 7.448*** | 3.915*** | 6.363*** | 7.147*** |
(0.182) | (0.206) | (0.217) | (0.178) | (0.204) | (0.221) | |
DEBT_RATIO | 5.183*** | −2.007 | −5.023*** | 5.385*** | −1.594 | −4.558*** |
(1.521) | (1.409) | (1.393) | (1.464) | (1.403) | (1.389) | |
TANGIBILITY | 15.191*** | 0.138 | 3.239** | 15.120*** | 0.278 | 3.051* |
(1.212) | (1.662) | (1.627) | (1.208) | (1.641) | (1.619) | |
Q | −0.043 | −0.014 | 0.015 | −0.013 | −0.009 | 0.005 |
(0.065) | (0.068) | (0.065) | (0.065) | (0.068) | (0.064) | |
ROA | −0.032 | −0.040 | 0.002 | −0.033 | −0.033 | 0.004 |
(0.038) | (0.037) | (0.036) | (0.038) | (0.036) | (0.036) | |
VOLA | −6.110*** | −0.775 | 0.791 | −3.146* | 1.216 | 1.916 |
(1.746) | (1.710) | (1.736) | (1.799) | (1.745) | (1.777) | |
ANALYST | 8.345*** | 6.894*** | 5.042*** | 8.005*** | 6.753*** | 5.106*** |
(0.457) | (0.451) | (0.482) | (0.458) | (0.451) | (0.482) | |
FREE_FLOAT | 0.011 | −0.003 | −0.021* | 0.024** | 0.022** | −0.003 |
(0.012) | (0.011) | (0.012) | (0.011) | (0.010) | (0.011) | |
DJSI_EU | 13.488*** | 10.063*** | 9.021*** | 12.980*** | 9.796*** | 8.911*** |
(0.692) | (0.648) | (0.657) | (0.691) | (0.646) | (0.659) | |
BGD | 0.270*** | 0.285*** | 0.199*** | 0.247*** | 0.267*** | 0.197*** |
(0.022) | (0.021) | (0.024) | (0.022) | (0.020) | (0.024) | |
BSIZE | 0.643*** | 0.600*** | 0.523*** | 0.639*** | 0.583*** | 0.528*** |
(0.080) | (0.076) | (0.090) | (0.080) | (0.077) | (0.090) | |
Constant | −82.029*** | −127.635*** | −137.702*** | −82.057*** | −121.814*** | −134.110*** |
(3.891) | (4.616) | (4.922) | (3.861) | (4.540) | (4.952) | |
Observations | 7384 | 7384 | 7384 | 7384 | 7384 | 7384 |
R-squared | 0.367 | 0.495 | 0.527 | 0.373 | 0.496 | 0.526 |
Industry FE | NO | YES | YES | NO | YES | YES |
Country FE | NO | NO | YES | NO | NO | YES |
Year FE | YES | YES | YES | YES | YES | YES |
Variables | (Model 1) | (Model 2) | (Model 3) | (Model 4) | (Model 5) | (Model 6) |
---|---|---|---|---|---|---|
Panel A: Emissions reduction category score (EMS) | ||||||
PRI_PERCENT | 0.165*** | 0.173*** | 0.109*** | |||
(0.020) | (0.020) | (0.023) | ||||
INV_HORIZON | 0.982*** | 0.960*** | 0.558*** | |||
(0.102) | (0.101) | (0.105) | ||||
Controls | YES | YES | YES | YES | YES | YES |
Constant | YES | YES | YES | YES | YES | YES |
Observations | 7384 | 7384 | 7384 | 7384 | 7384 | 7384 |
R-squared | 0.344 | 0.427 | 0.469 | 0.347 | 0.428 | 0.469 |
Industry FE | NO | YES | YES | NO | YES | YES |
Country FE | NO | NO | YES | NO | NO | YES |
Year FE | YES | YES | YES | YES | YES | YES |
Panel B: Product innovations category score (INNO) | ||||||
PRI_PERCENT | −0.021 | 0.038* | 0.089*** | |||
(0.022) | (0.022) | (0.025) | ||||
INV_HORIZON | 0.661*** | 0.418*** | 0.297** | |||
(0.117) | (0.114) | (0.121) | ||||
Controls | YES | YES | YES | YES | YES | YES |
Constant | YES | YES | YES | YES | YES | YES |
Observations | 7290 | 7290 | 7290 | 7290 | 7290 | 7290 |
R-squared | 0.221 | 0.365 | 0.389 | 0.224 | 0.366 | 0.388 |
Industry FE | NO | YES | YES | NO | YES | YES |
Country FE | NO | NO | YES | NO | NO | YES |
Year FE | YES | YES | YES | YES | YES | YES |
Panel C: Resource use category score (RES) | ||||||
PRI_PERCENT | 0.116*** | 0.142*** | 0.106*** | |||
(0.020) | (0.020) | (0.024) | ||||
INV_HORIZON | 0.920*** | 0.766*** | 0.421*** | |||
(0.105) | (0.102) | (0.109) | ||||
Controls | YES | YES | YES | YES | YES | YES |
Constant | YES | YES | YES | YES | YES | YES |
Observations | 7374 | 7374 | 7374 | 7374 | 7374 | 7374 |
R-squared | 0.334 | 0.425 | 0.456 | 0.339 | 0.426 | 0.456 |
Industry FE | NO | YES | YES | NO | YES | YES |
Country FE | NO | NO | YES | NO | NO | YES |
Year FE | YES | YES | YES | YES | YES | YES |
Variables | (Model 1) | (Model 2) | (Model 3) | (Model 4) | (Model 5) | (Model 6) |
---|---|---|---|---|---|---|
PRI_PERCENT | 0.019*** | 0.022*** | 0.012*** | |||
(0.003) | (0.003) | (0.003) | ||||
INV_HORIZON | 0.135*** | 0.136*** | 0.081*** | |||
(0.011) | (0.012) | (0.014) | ||||
SIZE | 0.229*** | 0.430*** | 0.603*** | 0.187*** | 0.363*** | 0.557*** |
(0.029) | (0.035) | (0.043) | (0.028) | (0.035) | (0.044) | |
DEBT_RATIO | −0.407** | −0.859*** | −1.222*** | −0.219 | −0.677*** | −1.153*** |
(0.198) | (0.217) | (0.253) | (0.183) | (0.219) | (0.260) | |
TANGIBILITY | 0.618*** | 0.286 | 0.793*** | 0.594*** | 0.357 | 0.787*** |
(0.158) | (0.236) | (0.269) | (0.157) | (0.238) | (0.267) | |
Q | 0.032 | 0.047 | 0.041 | 0.036 | 0.052 | 0.045 |
(0.041) | (0.051) | (0.038) | (0.040) | (0.053) | (0.042) | |
ROA | −0.006 | −0.003 | 0.002 | −0.005 | −0.001 | 0.001 |
(0.007) | (0.007) | (0.007) | (0.006) | (0.007) | (0.007) | |
VOLA | −1.397*** | −0.973*** | −1.036*** | −0.834*** | −0.432 | −0.758** |
(0.239) | (0.274) | (0.299) | (0.252) | (0.279) | (0.302) | |
ANALYST | 0.555*** | 0.465*** | 0.347*** | 0.530*** | 0.442*** | 0.352*** |
(0.055) | (0.059) | (0.067) | (0.057) | (0.060) | (0.067) | |
FREE_FLOAT | 0.010*** | 0.008*** | 0.001 | 0.015*** | 0.014*** | 0.004** |
(0.002) | (0.002) | (0.002) | (0.001) | (0.002) | (0.002) | |
DJSI_EU | 1.892*** | 1.792*** | 1.579*** | 1.855*** | 1.762*** | 1.552*** |
(0.212) | (0.218) | (0.219) | (0.216) | (0.221) | (0.219) | |
BGD | 0.028*** | 0.027*** | 0.017*** | 0.025*** | 0.024*** | 0.017*** |
(0.003) | (0.003) | (0.004) | (0.003) | (0.003) | (0.004) | |
BSIZE | 0.022** | 0.023** | 0.018 | 0.017 | 0.017 | 0.016 |
(0.011) | (0.011) | (0.014) | (0.011) | (0.011) | (0.014) | |
Constant | −6.361*** | −11.212*** | −14.531*** | −6.638*** | −10.863*** | −14.223*** |
(0.634) | (0.822) | (1.031) | (0.634) | (0.824) | (1.039) | |
Observations | 5,714 | 5,636 | 5,626 | 5,714 | 5,636 | 5,626 |
Pseudo r-squared | 0.189 | 0.245 | 0.301 | 0.202 | 0.254 | 0.305 |
Industry FE | NO | YES | YES | NO | YES | YES |
Country FE | NO | NO | YES | NO | NO | YES |
Year FE | YES | YES | YES | YES | YES | YES |