Green Tilts

Lubos Pastor, Robert Stambugh, Lucian Taylor

2023 | Academic | Portfolio Construction, Sustainable Investing

We estimate financial institutions' portfolio tilts that relate to stocks' environmental, social, and governance (ESG) characteristics. In 2021, ESG-related tilts total 6% of the investment industry's assets and average nearly 25% of institutions' total portfolio tilts. ESG tilts are larger for less-volatile stocks and for institutions with smaller size and greater active share, consistent with our theoretical predictions.