Investor Commitment to Responsible Investing and Firm ESG Disclosure

We examine whether investors’ commitment to socially responsible investment principles influences the public disclosure of environmental, social, and governance (ESG) issues of their investee firms. We find that following institutional investors’ public commitment to the United Nations Principles for Responsible Investment (PRI), ESG disclosure in SEC Forms 10-K and 10-Q increases with the proportion of shares owned by institutional investors committed to PRI. Our evidence is robust to considering: (1) other non-PRI institutional ownership, (2) current and past firm ESG performance, (3) simultaneous estimation of investment decision, ESG performance and ESG disclosure, and (4) a shock to investor demand for environmental information. We also find that the improvement in firm ESG disclosure is attributable primarily to PRI institutional investors from Europe. Our analyses suggest that investors public commitment to social responsibility is a critical mechanism to improve firms’ public disclosure of ESG activities