Sustainable Investing Home and Abroad | Lucie Y. Lu

Sustainable Investing Home and Abroad


We study how firms’ ESG performance affects domestic and foreign institutional investment and rebalancing. Country-by-country post-double-LASSO estimates reveal heterogeneous marginal effect of ESG on firm-level institutional ownership. At the institution-firm level, institutions exhibit a novel form of home bias: tilting towards high-ESG firms only when these firms are domestic. Institutions are more patient towards high-ESG firms after negative past performance but the mitigation effect is significantly weaker for foreign firms and disappears during distressed episodes.

Working Paper