Hostname: page-component-669899f699-8p65j Total loading time: 0 Render date: 2025-05-02T10:44:41.442Z Has data issue: false hasContentIssue false
  • English
  • Français

Walk the green talk? A textual analysis of pension funds' disclosures of sustainable investing

Published online by Cambridge University Press:  12 December 2024

Rob Bauer ,
Dirk Broeders Open the ORCID record for Dirk Broeders [Opens in a new window]  and
Annick van Ool
Rob Bauer
Affiliation:
Maastricht University, Maastricht, The Netherlands
Dirk Broeders*
Affiliation:
Maastricht University, Maastricht, The Netherlands European Central Bank, Frankfurt am Main, Germany
Annick van Ool
Affiliation:
De Nederlandsche Bank, Amsterdam, The Netherlands
*
Corresponding author: Dirk Broeders; Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

We analyze the disclosures of sustainable investing by Dutch pension funds in their annual reports by introducing a novel textual analysis approach using state-of-the-art natural language processing techniques to measure the awareness and implementation of sustainable investing. We find that a pension fund's size increases both the awareness and implementation of sustainable investing. Moreover, we analyze the role of signing a sustainable investment initiative. Although signing this initiative increases the specificity of pension fund statements about sustainable investing, we do not find an effect on the implementation of sustainable investing.

Keywords

ESGnatural language processingpension fundssustainability

JEL classification

M14: Corporate Culture • Diversity • Social Responsibility Q54: Climate • Natural Disasters and Their Management • Global Warming C8: Data Collection and Data Estimation Methodology • Computer Programs G11: Portfolio Choice • Investment Decisions J32: Nonwage Labor Costs and Benefits • Retirement Plans • Private Pensions
Type
Article
Information
Journal of Pension Economics & Finance , Volume 24 , Issue 2 , April 2025 , pp. 297 - 325
Copyright
Copyright © The Author(s), 2024. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Amel-Zadeh, A and Serafeim, G (2018) Why and how investors use ESG information: evidence from a global survey. Financial Analysts Journal 74, 87–103.CrossRefGoogle Scholar
Bauckloh, T, Schaltegger, S, Utz, S, Zeile, S and Zwergel, B (2021) Active first movers vs. late free-riders? An empirical analysis of UN PRI signatories’ commitment. Journal of Business Ethics 182, 747–781.CrossRefGoogle Scholar
Bauer, R and Smeets, P (2015) Social identification and investment decisions. Journal of Economic Behavior & Organization 117, 121–134.CrossRefGoogle Scholar
Bauer, R, Bogman, R, Bonetti, M and Broeders, D (2020 a) The impact of trustees’ age and representation on strategic asset allocations. De Nederlandsche Bank Working Paper.CrossRefGoogle Scholar
Bauer, R, Bonetti, M and Broeders, D (2020 b) Common advisor effect in strategic asset allocations. De Nederlandsche Bank Working Paper.Google Scholar
Bauer, R, Ruof, T and Smeets, P (2021) Get real! Individuals prefer more sustainable investments. The Review of Financial Studies 34, 3976–4043.CrossRefGoogle Scholar
Bauer, R, Derwall, J and Tissen, C (2023) Private shareholder engagements on material ESG issues. Financial Analysts Journal 79, 64–95.CrossRefGoogle Scholar
Berg, F, Koelbel, JF and Rigobon, R (2022) Aggregate confusion: the divergence of ESG ratings. Review of Finance 26, 1315–1344.CrossRefGoogle Scholar
Berk, J and van Binsbergen, JH (2021) The impact of impact investing. Available at SSRN 3909166.CrossRefGoogle Scholar
Berkman, H, Jona, J and Soderstrom, NS (2021) Firm-specific climate risk and market valuation. Available at SSRN 2775552.Google Scholar
Bikker, JA, Broeders, DW, Hollanders, DA and Ponds, EH (2012) Pension funds’ asset allocation and participant age: a test of the life-cycle model. Journal of Risk and Insurance 79, 595–618.CrossRefGoogle Scholar
Bingler, JA, Kraus, M, Leippold, M and Webersinke, N (2022) Cheap talk and cherry-picking: what climatebert has to say on corporate climate risk disclosures. Finance Research Letters 47, 102776.CrossRefGoogle Scholar
Boermans, MA and Galema, R (2019) Are pension funds actively decarbonizing their portfolios? Ecological Economics 161, 50–60.CrossRefGoogle Scholar
Boermans, M and Galema, R (2020) Carbon home bias of European investors. Available at SSRN 3632723.CrossRefGoogle Scholar
Bolton, P and Kacperczyk, M (2021) Do investors care about carbon risk? Journal of Financial Economics 142, 517–549.CrossRefGoogle Scholar
Broeders, DW, Jansen, KA and Werker, BJ (2021) Pension fund's illiquid assets allocation under liquidity and capital requirements. Journal of Pension Economics & Finance 20, 102–124.CrossRefGoogle Scholar
Ceccarelli, M, Glossner, S, Homanen, M and Schmidt, D (2021) Which institutional investors drive corporate sustainability? Available at SSRN 3988058.Google Scholar
Chatterji, AK, Durand, R, Levine, DI and Touboul, S (2016) Do ratings of firms converge? Implications for managers, investors and strategy researchers. Strategic Management Journal 37, 1597–1614.Google Scholar
Chen, T, Dong, H and Lin, C (2020) Institutional shareholders and corporate social responsibility. Journal of Financial Economics 135, 483–504.CrossRefGoogle Scholar
Choi, D, Gao, Z, Jiang, W and Zhang, H (2021) Global carbon divestment and firms’ actions. Available at SSRN 3589952.Google Scholar
Delsen, L and Lehr, A (2019) Value matters or values matter? An analysis of heterogeneity in preferences for sustainable investments. Journal of Sustainable Finance & Investment 9, 240–261.CrossRefGoogle Scholar
Devlin, J, Chang, M-W, Lee, K and Toutanova, K (2019) Bert: pre-training of deep bidirectional transformers for language understanding. Proceedings of NAACL-HLT.Google Scholar
Diaz-Rainey, I, Griffin, PA, Lont, DH, Mateo-Márquez, AJ and Zamora-Ramírez, C (2024) Shareholder activism on climate change: evolution, determinants, and consequences. Journal of Business Ethics 193(3), 481–510.CrossRefGoogle Scholar
Dyck, A, Lins, KV, Roth, L and Wagner, HF (2019) Do institutional investors drive corporate social responsibility? International evidence. Journal of Financial Economics 131, 693–714.CrossRefGoogle Scholar
Edmans, A (2023) Applying economics – not gut feel – to ESG. Financial Analysts Journal 79, 16–29.CrossRefGoogle Scholar
Edmans, A and Kacperczyk, M (2022) Sustainable finance. Review of Finance 26, 1309–1313.CrossRefGoogle Scholar
Egli, F, Schärer, D and Steffen, B (2022) Determinants of fossil fuel divestment in European pension funds. Ecological Economics 191, 107237.CrossRefGoogle Scholar
Fabrizio, KR and Kim, E-H (2019) Reluctant disclosure and transparency: evidence from environmental disclosures. Organization Science 30, 1207–1231.CrossRefGoogle Scholar
Faccini, R, Matin, R and Skiadopoulos, G (2023) Dissecting climate risks: are they reflected in stock prices? Journal of Banking & Finance 155, 106948.CrossRefGoogle Scholar
Friederich, D, Kaack, LH, Luccioni, A and Steffen, B (2021) Automated identification of climate risk disclosures in annual corporate reports. arXiv preprint arXiv:2108.01415.Google Scholar
Gentzkow, M, Kelly, B and Taddy, M (2019) Text as data. Journal of Economic Literature 57, 535–574.CrossRefGoogle Scholar
Gibson, R, Krueger, P and Mitali, SF (2020) The sustainability footprint of institutional investors: ESG driven price pressure and performance. Swiss Finance Institute Research Paper, 17-05.Google Scholar
Gibson Brandon, R, Krueger, P and Schmidt, PS (2021) ESG rating disagreement and stock returns. Financial Analysts Journal 77, 104–127.CrossRefGoogle Scholar
Gibson Brandon, R, Glossner, S, Krueger, P, Matos, P and Steffen, T (2022) Do responsible investors invest responsibly? Review of Finance 26, 1389–1432.CrossRefGoogle Scholar
Giglio, S, Maggiori, M, Stroebel, J, Tan, Z, Utkus, S and Xu, X (2023) Four facts about ESG beliefs and investor portfolios. NBER Working Paper 31114.CrossRefGoogle Scholar
Gollier, C and Pouget, S (2014) The ‘washing machine’: investment strategies and corporate behavior with socially responsible investors. TSE Working Paper, 14–457.Google Scholar
Grootendorst, M (2022) BERTopic: neural topic modeling with a class-based TF-IDF procedure. arXiv preprint arXiv:2203.05794.Google Scholar
GSIA (2021) Global Sustainable Investment Review 2020. GSIA. gsi-alliance.org.Google Scholar
Hammond, PB, Maurer, R and Mitchell, OS (2023). Pension funds and sustainable investment. Oxford University Press.CrossRefGoogle Scholar
Harjoto, M, Laksmana, I and Lee, R (2015) Board diversity and corporate social responsibility. Journal of Business Ethics 132, 641–660.CrossRefGoogle Scholar
Heinkel, R, Kraus, A and Zechner, J (2001) The effect of green investment on corporate behavior. Journal of Financial and Quantitative Analysis 36, 431–449.CrossRefGoogle Scholar
Hong, H and Kacperczyk, M (2009) The price of sin: the effects of social norms on markets. Journal of Financial Economics 93, 15–36.CrossRefGoogle Scholar
Ilhan, E, Sautner, Z and Vilkov, G (2021) Carbon tail risk. The Review of Financial Studies 34, 1540–1571.CrossRefGoogle Scholar
Ilhan, E, Krueger, P, Sautner, Z and Starks, LT (2023) Climate risk disclosure and institutional investors. The Review of Financial Studies 36, 2617–2650.CrossRefGoogle Scholar
Kempf, A and Osthoff, P (2008) Sri funds: Nomen est omen. Journal of Business Finance & Accounting 35, 1276–1294.CrossRefGoogle Scholar
Kim, E-H and Lyon, TP (2015) Greenwash vs. Brownwash: exaggeration and undue modesty in corporate sustainability disclosure. Organization Science 26, 705–723.CrossRefGoogle Scholar
Kim, S and Yoon, A (2023) Analyzing active fund managers’ commitment to ESG: evidence from the United Nations principles for responsible investment. Management Science 69, 741–758.CrossRefGoogle Scholar
Kölbel, JF, Leippold, M, Rillaerts, J and Wang, Q (2024) Ask BERT: how regulatory disclosure of transition and physical climate risks affects the CDS term structure. Journal of Financial Econometrics 22(1), 30–69.CrossRefGoogle Scholar
Krueger, P, Sautner, Z and Starks, LT (2020) The importance of climate risks for institutional investors. The Review of Financial Studies 33, 1067–1111.Google Scholar
Marquis, C, Toffel, MW and Zhou, Y (2016) Scrutiny, norms, and selective disclosure: a global study of greenwashing. Organization Science 27, 483–504.CrossRefGoogle Scholar
OCED (2011) OECD Guidelines for Multinational Enterprises, OECD Publishing, http://dx.doi.org/10.1787/9789264115415-en.CrossRefGoogle Scholar
OECD (2017) Responsible Business Conduct for Institutional Investors: Key Considerations for Due Diligence under the OECD Guidelines for Multinational Enterprises. OECD.Google Scholar
Riedl, A and Smeets, P (2017) Why do investors hold socially responsible mutual funds? The Journal of Finance 72, 2505–2550.CrossRefGoogle Scholar
Rubin, DB (1973) Matching to remove bias in observational studies. Biometrics, 29, 159–183.CrossRefGoogle Scholar
Sautner, Z, Van Lent, L, Vilkov, G and Zhang, R (2023) Pricing climate change exposure. Management Science 69, 7151–7882.CrossRefGoogle Scholar
Scholtens, B (2006) Finance as a driver of corporate social responsibility. Journal of Business Ethics 68, 19–33.CrossRefGoogle Scholar
Sievänen, R, Rita, H and Scholtens, B (2013) The drivers of responsible investment: the case of European pension funds. Journal of Business Ethics 117, 137–151.CrossRefGoogle Scholar
Stuart, EA (2010) Matching methods for causal inference: a review and a look forward. Statistical Science 25, 1.CrossRefGoogle Scholar
Subramanian, S, Cohn, T and Baldwin, T (2019) Deep ordinal regression for pledge specificity prediction. arXiv preprint arXiv:1909.00187.Google Scholar
United Nations (2011) The United Nations Guiding Principles on business and human rights, Implementing the United Nations “Protect, Respect and Remedy” Framework, https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf.Google Scholar
Velte, P (2016) Women on management board and ESG performance. Journal of Global Responsibility 7, 98–109.CrossRefGoogle Scholar
Wagemans, FA, Van Koppen, C and Mol, AP (2018) Engagement on ESG issues by Dutch pension funds: is it reaching its full potential? Journal of Sustainable Finance & Investment 8, 301–322.CrossRefGoogle Scholar