Do Institutional Investors Vote Responsibly? Global Evidence

This study investigates whether institutional investors support corporate sustainability by analyzing their voting behavior on sustainability-related proposals. It offers both reflections on the drivers of investor sustainability engagement and empirical evidence on institutional investor voting behavior across the globe.

Drawing on a comprehensive dataset of 1,880 ESG-focused voting items from 188 global institutional investors (2018–2023), the paper applies the W-Nominate spatial modeling technique (adapted from political science) to map ideological orientations based on voting patterns. The research maps investor sustainability ideology on a spatial model [-1,+1]. The findings reveal that European institutional investors, confronted with more robust social and legal norms, genuinely exhibit ESG preferences, while many US investors (including the largest asset managers and self-labeled ESG funds) show weaker support, raising concerns about potential greenwashing.

The study contributes to the literature on sustainable finance and investor stewardship by introducing a novel approach to uncovering sustainability ideology. It is the first to use of the W-Nominate model in an international context with a recent sample of ESG voting items, providing a more comprehensive global understanding of the factors influencing sustainable investor behavior. The findings emphasize the importance of the investor’s domicile and type when assessing true sustainability preferences. It demonstrates how legal frameworks, social norms, and institutional characteristics shape investor behavior, and it highlights the limitations of ESG branding in signaling authentic commitment.

The results carry implications for regulators, asset owners, and beneficiaries seeking to evaluate the credibility of institutional investors’ sustainability practices and enhance accountability in ESG engagement.