Center for Advanced Management




Prof. Peiran Jiao (Maastricht University)

Datum: Mittwoch, 28. September

Zeit: 10:30 - 12:00

Ort: Raum 314, Schackstraße 4, 3. OG

Titel: Driving Forces of Sustainable Investments

Socially responsible investing has been increasing tremendously, yet little is known about its driving force. In this seminar, we will show you some experimental and empirical evidence for the underlying reasons of investors’ ESG (environmental, social and governance) preferences. The following two projects will be presented under this common topic.

Altruists going on an ego trip: Beliefs and ambiguity attitudes in socially responsible investment

Abstract: Trillions of dollars are invested in socially responsible businesses. However, the true underlying mechanism for investors' socially responsible investment is yet unknown. In this paper, we investigate beliefs towards an ESG (environmental, social, governance) fund in an incentivized lab experiment. Subjects in our experiment were given exactly the same information about a fund with or without knowing that the fund has a high ESG rating between treatments, and we designed methods to formally evaluate their beliefs about the fund's return and risk for both short-run (1 year) and long-run (3 years), updating of belief in the face of positive and negative return information, and perception of the level of ambiguity. We find that knowing the high ESG rating increased subjects' return expectation, which is the opposite of what has been found in widely used unincentivized survey studies. Moreover, the high ESG rating made subjects more conservative when updating on negative information, and perceive lower ambiguity. This suggests that the unincentivized elicitation of ESG-related beliefs could be systematically biased. Our results contribute to the understanding of why investors hold high ESG investments and to the design of relevant policies.

ESG resilience during the pandemic: Evidence from the US

Abstract: The relationship between a company’s ESG (environmental, social, and governance) attributes and its stock performance has been quite debatable, whereas the COVID-19 pandemic offers a rare opportunity to investigate high ESG stocks’ resilience to the market turmoil. Using data of firms in the S&P 1500 from January to December 2020 and their MSCI ESG scores, our results suggest that high ESG stocks generated more abnormal returns than low ESG stocks during the whole year. A closer look at the data reveals considerable heterogeneity of the relative performance of high ESG stocks depending on the phase of the pandemic and the subcategories of ESG factors. Thus, when market uncertainty increases, investors could potentially gain resilience from high ESG firms. We try to explore the mechanism behind these findings using investor sentiments.