The ESG Initiative at the Wharton School
The Ethical Investor: Confirmed – ESG investors care for the environment… as long as it turns a profit
A new research paper by Wharton University found that retail investors care about a stock’s ESG related activities – but only if they don’t adversely affect the value of their investments.
Titled “Retail Investors and ESG News” and co-authored by Wharton’s accounting professor Christina Zhu, the paper also found that ESG investors are not motivated by altruistic motives.
“Retail investors treat ESG information like they do financial information, and they trade on such news in the same way as financial news,” said Zhu.
Zhu also said that her findings disputed many surveys that suggest retail investors “are willing to sacrifice a little bit of wealth for the environment or other ESG causes”.
“Retail investors care about ESG factors primarily to the extent they are financially material for company performance. In other words, retail investors profit from trading on ESG-related information when it is relevant to firm value,” Zhu said.