Catering through transparency: Voluntary ESG disclosure by asset managers and fund flows
With Marco Ceccarelli (University of Zurich and Swiss Finance Institute) and Simon Glossner (University of Virginia – Darden School of Business)
Our paper finds that, by using a standardized disclosure framework, clients are able to identify investors with higher levels of ESG integration, thereby alleviating informational asymmetries within the responsible investment landscape. We show this by examining institutional investor’s voluntary disclosure about their ESG practices. After joining the Principles for Responsible Investing (PRI), the world’s largest responsible investment network, investors are obliged to file an annual ESG report, which is assessed and scored by the PRI. Clients allocate more assets toward institutions that receive higher scores on the reporting framework. This effect is particularly strong when the voluntary disclosure is confirmed by ESG ratings verified by Morningstar.