This empirical study builds upon the recent paper, “Active Ownership”, published as the Lead Article in the December 2015 issue of the Review of Financial Studies. The research is being led by Professor Elroy Dimson (University of Cambridge), Dr Oğuzhan Karakaş (University of Cambridge) and Dr Xi Li (London School of Economics).

This earlier research received widespread recognition through receipt of the Moskowitz Prize for the Best Paper in Socially Responsible Investing, the FIR-PRI Award for the Best Published Research on Sustainable Investing, and the Investor Responsibility Research Center Institute annual Honorable Mention. The new study broadens the research to a global scale and a long sample period.

This project has been supported by a number of awards including; The Risk Institute at Ohio State University’s Fisher College of Business, Inquire Europe, the PRI, Invesco Perpetual and the London School of Economics.

[MUSIC PLAYING] Professor Elroy Dimson has recently been awarded the 2017 Cambridge Judge Business School’s Research Impact Prize and the Vice Chancellor’s Impact Award. We caught up with him to discuss his research into active ownership and how it is impacting environmental, social, and governance strategy globally.

So how does active ownership fit in to being a responsible investor? It’s more than simply asking as a responsible investor what are you prepared to invest in and what do you wish to avoid. Nowadays, what people are focused on is engaging with companies. So as an owner, just as you would have a responsibility when you own an entire business– say it’s a candy store– to make sure that it is safe for people to work in, the same is true if you own a share in a huge business. And so it’s appropriate to engage with businesses where you are a significant shareholder and to seek to persuade them to run their businesses in a way which is appropriate.

That may mean appropriate labour practises. It may mean safety. It may mean care for the environment. There could be many different dimensions.

Well, responsible investing is, in some ways, easiest to explain through my association with Norway’s Sovereign Wealth Fund. Norway as a country, and Norway’s population, see themselves as having high ethical standards, and so they set up a structure for managing the funds which involved three parties. One is the asset owner, represented by the Ministry of Finance. The other one is the asset manager, the group who actually look after the assets. Those two are kind of usual. And then the third one was a council on ethics. And the Council on Ethics provides guidance as to whether companies are acceptable or unacceptable to hold in the portfolio.

In terms of investment responsibility, there are certain kinds of companies which are deemed to be unacceptable in terms of their products or in terms of their behaviour for holding in the portfolio. And so Norway’s Sovereign Wealth Fund avoids those companies.

The work on active ownership consisted of focusing on the active owner– that is, the shareholder, the investment firm– which has got the longest history of investing in companies and engaging with them to enhance their behaviour on environmental and social and governance grounds.

The people who I worked with on this were Oghuzan Karakas, who was based in the US, but we’ve now hired him to our centre in Cambridge, and Xi Li, who was also based in the US and has come to London and is a fellow of the centre.

Professor Dimson’s research comes at a time when large investors are searching for evidence-based, responsible investment strategies.

What we’ve done is to do considerable work on looking at the impact of engaging with companies and whether that changes the way companies behave, and changes it for the better, and whether it’s also associated with superior performance by the company.

Well, amongst the things that I’m working on at present, there are two themes. One is long-term financial investments. I continue to work on asset allocation, long-term returns, what the impact is of being able to invest in many different markets and many, many different kinds of assets. So that’s on the one hand. And then on the other hand, that is looking to the future, the focus on sustainability and the long-term viability of different kinds of investment strategies. So that’s what’s taken me into areas such as ESG and socially responsible investing.


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Dimson, E., Karakas, O. and Li, X. (2015) “Active ownership.” Review of Financial Studies (conditionally accepted) (available online via the SSRN