Does Paying Passive Managers to Engage Improve ESG Performance?
The paper studies a natural experiment in responsible investment conducted by the Japanese Government Pension Investment Fund (GPIF). In 2018 GPIF gave its largest passive manager a remunerated mandate to engage with portfolio companies to improve environmental, social and governance performance. The fund adopted best-in-class indexes, rewarding companies with high ESG scores with additional equity investment. Using private data and difference-in-differences analysis we show that engagement by the asset manager has improved scores.