Enrichetta Ravina (Chicago Fed)
Title:
Proxy Voting and the Rise of ESG
Abstract:
We track the temporal pattern of institutional investors’ ideologies as revealed by their proxy votes from 2005 to 2018. Despite the financial crisis, the regulatory changes on proxy voting and transformation of the asset management industry it has spawned, and despite the rise of the socially responsible investment movement, we find that the ideology of the largest investors has remained highly stable. The ideologies of institutional investors are revealed by a dynamic, spatial scaling analysis of all proxy votes of 561mutual fund families. We characterize voting as driven by single-peaked preferences in a two-dimensional Euclidean space. One dimension reflects the familiar left-right ideological leanings, with more socially responsible investors on the left, and the other dimension differences in attitudes towards management, with management-friendly investors at one end and management-disciplinarians at the other. Although the ideology of the largest investors remains solidly stable on average, we find that the ideologies of a substantial fraction of other investors evolve substantially over time.