On ESG Investing: Heterogeneous Preferences, Information, and Asset Prices

Green Investing, Information Asymmetry, and Capital Structure

“…First, this paper contributes to the literature on the consequences of investors' ESG preferences on the financial markets (Pedersen et al, 2020;Pástor et al, 2020;Goldstein, Kopytov, Shen, and Xiang, 2022). A growing body of research has discussed the impact of ESG on firms' financial performance.…”

Four Facts About ESG Beliefs and Investor Portfolios

“…While some proponents of ESG investing extol its societal benefits, critics argue that retail investors might not fully appreciate the possible financial return implications of incorporating ethical considerations into investment decisions. Despite the growing focus on the costs and benefits of ESG investing among researchers and policymakers (see, for example Goldstein et al, 2022;Pástor et al, 2021;Pedersen et al, 2021), the actual motives of retail investors for investing in ESG assets-including the relative importance of financial and non-financial considerations-are not well understood.…”

“…The heterogeneity that we document (in beliefs, ESG holdings, and climate concerns) has interesting consequences for both theory and policy. On the theory side, it can be used to calibrate and discipline theoretical models that explicitly consider investors who are driven by different motivations for ESG investing (Heinkel et al, 2001;Berk and van Binsbergen, 2021;Goldstein et al, 2022;Pástor et al, 2021). On the policy side, tracking the evolution of investors' ESG attitudes and investments can help policymakers align their regulatory and legislative responses to climate change with corresponding pressures from investors and other market participants.…”

“…For example,Pástor et al (2021) andGoldstein et al (2022) emphasize ethical considerations,Engle et al (2020) andAlekseev et al (2022) emphasize hedging properties, andBaron (2001),Bénabou and Tirole (2010) andAlbuquerque et al (2019) emphasize the ability to generate excess returns.…”