Institutional Investors' Influence on ESG Endeavours: A Study on the Nordic Market

Abstract

This study examines whether institutional ownership has an effect on the ESG performance of firms on the Nordic market. In order to accomplish this, the study uses linear regression analysis. The final dataset which was examined consisted of data on 362 Nordic companies collected in the measurement period of 2011-2020. The results from the main model were ambiguous and it could not be stated with certainty whether or not institutional ownership affects the ESG performance one way or another, or perhaps not at all. However, a sensitivity test which featured each individual pillar of ESG tested against institutional ownership gave significant results, indicating a negative relationship between the Environmental pillar and institutional ownership. This agrees with the theory of sustainable investments as an agency cost. Nonetheless, the main insights provided are that the true nature of the relationship between ESG performance and institutional ownership persists in being elusive on the Nordic markets during recent years as well.