Turning the Titans: Institutional Ownership and ESG Performance in Nordic Firms

Abstract: This paper examines whether institutional investors drive ESG performance of public firms in the Nordic countries and whether the effect differs depending on the type of investor. We find evidence that institutional investor ownership in aggregate has a positive correlation effect on firm ESG-performance as measured by the Refinitiv Eikon index. Furthermore, we find substantial differences between different types of institutional investors, with VC and PE having a negative correlation effect. Meanwhile, we find a substantial positive effect for hedge funds. Supposing the investor groups with the highest effects were to increase or decrease their ownership of firms in the Nordic countries in substantial magnitudes, we predict sizeable changes in the ESG performance of the firms.