Which Investors Support The Transition Towards A Low-Carbon Economy? Exit and Voice In Mutual Funds

Reducing portfolio carbon footprints (Exit) and voting in favor of climate-related shareholder proposals (Voice) are among the main actions that investors can take to promote an accelerated transition towards a low-carbon economy. This paper studies three important investor groups that can be instrumental in driving the transition and evaluates their Exit and Voice behavior. I find that the five largest asset managers perform poorly on Exit and Voice and only a small fraction of signatories to sustainable investor initiatives are supportive of the transition. Counterintuitively, investors who perform poorly on Exit, perform well on Voice. Finally, I examine the financial consequences of employing Exit and Voice and find that Exit is positively related to risk-adjusted fund returns, however, this is not attributable to superior skill of fund managers