Sustainable Investing Under Delegated Investment Management
This paper considers how profit-motivated fund managers of sustainable and passive funds, govern the firms in the portfolios they construct using the capital collected from socially responsible investors. The fund managers endogenously choose their level of engagement with these firms to increase their profit while reducing any negative externalities. Using the search model framework between fund managers and investors, we derive several theoretical and empirical implications with regard to the effects of passive fund growth, sustainable fund growth, and improvement in environmental, social, and governance (ESG) engagement cost upon ESG and monetary performances generated by portfolio firms.
Delegated asset investment; ESG; Passive fund; Social impact; Socially responsible investing; Sustainable fund
D83, G23, G32, M14
Junior Research Fellow, Research Institute for Economics & Business Administration, Kobe University
Faculty of Business Administration and Accountancy, Khon Kaen University
Faculty of Economics, Konan University