Abstract
AbstractThis paper analyses the role of social responsible (SR) pension funds as influential institutional shareholders in the corporate sustainability of investee firms. We study the influence of 197 UK SR pension funds on 1,253 firms with 31 environmental, social, and governance (ESG) indicators from 2002 to 2018. According to the indicator nature, we perform logit and ordinary least square (OLS) estimations with panel error correction models to control causality. Our results show that SR pension funds significantly impact on 41.93% of the ESG indicators studied. We find that larger pension‐fund shareholding positively influences on ESG firm performance and encourages proactive behaviour towards environmental practices. Firms with larger pension‐fund shareholding are more likely to use renewable energies and disclose environmental information, increasing the firm transparency towards stakeholders. This study contributes to understand that, besides stakeholders, institutional shareholders (SR pension funds) demand sustainable development and are able to transfer important values for the society and the environment to corporate governance.
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