Abstract

This paper seeks to identify the relation between the Environmental, Social, and Governance (ESG) score of institutional blockholders and the ESG score of their investee firms. I examine this relation using a unique dataset that identifies owners, their identities, their level of ownership, and their own ESG scores (which can be taken as a proxy of their stance on ESG). I find a relation between the identity and ownership of blockholder as well as the ESG scores of blockholders and the ESG scores of their investee firms. The results indicate that a higher ownership of active investors has a positive impact on the responsive CSR (RCSR) score of their investee firms and no clear impact on the adaptive CSR (ACSR) score. Higher ownership of passive investors, however, has a positive impact on ACSR scores and no clear impact on RCSR scores. I also find a concave relation between the RCSR scores of passive investors and the RCSR scores of their investee firms. Finally, I find some evidence of a negative relation between ACSR scores of active investors and those of their investee firms and a positive relation between the ACSR scores of passive investors and those of their investee firms. Overall, the results provide evidence of a connection between the identities, ownership levels, and CSR practices of institutional blockholders and those of their investee firms.