Who owns (un)sustainable companies? Examining institutional determinants of sustainable investing

• Published in: Journal of cleaner production 2023-10, Vol.422, p.138542, Article 138542
• Main Authors: van Zanten, Jan Anton, Rein, Bruno
• Format: Article
• Language: English
• Subjects: Asset management; Environment, Social and Governance (ESG); Institutional theory; Responsible investment; Stock ownership; Sustainable development; Sustainable development goals (SDGs); Sustainable investment
• ISSN: 0959-6526; 1879-1786
• DOI: 10.1016/j.jclepro.2023.138542

Sustainable development requires more investment in sustainable companies and less in unsustainable firms. However, the factors driving sustainable investing are not well understood. To address this gap, this paper uses institutional theory to examine three determinants of sustainable investing: (1) investor commitment to sustainable investing initiatives; (2) normative pressure; and (3) home-country influences. The findings indicate that sustainable investing initiatives do not guarantee more sustainable asset allocation among members. Normative pressure correlates with reduced investment in unsustainable companies. Investors from home-countries with legal systems prioritizing diverse stakeholders, and with governments committed to achieving the Sustainable Development Goals (SDGs), tend to invest less in unsustainable companies. Conversely, investors from countries with limited SDG progress show higher investment in unsustainable firms, while those from more developed nations invest more in sustainable companies. These results highlight the need for a critical examination of institutional efficacy in promoting sustainable investing.