Does institutional commitment affect ESG performance of firms? Evidence from the United Nations principles for responsible investment

Abstract

Based on the sample of institutions in China that signed the United Nations Principles of Responsible Investment over the period from 2012 to 2021, we study whether institutional commitment improve their environmental, social, and governance performance. The results show that institutional commitment has better environmental, social, and governance performance on its investment targets. After a series of robustness tests such as instrumental variable method and propensity score matching method, the main regression results remain unchanged. In further analysis, we find that this relationship is more pronounced when institutions are controlled by the state and have more media coverage. This study provides a new dimension for the firms to enhance environmental, social, and governance performance and also provides a theoretical basis for United Nations Principles of Responsible Investment to further expand its scope of influence.