Winners of 2018 IRRC Institute Research Award Examine Pressing, Big Picture Investor Issues – Impact of Index Funds and Impact of Responsible Investing

Honorable Mention Academic Research Explores Sustainability and
Stock Prices

NEW YORK–(BUSINESS WIRE)–An academic research paper examining the corporate stewardship of index
fund managers and a practitioner paper looking at how to measure the
amount of sustainable investing in equity portfolios are the winners of
the 2018 Investor
Responsibility Research Center Institute
(IRRCi) annual investor
research competition. Each winning research team will share a $10,000

“The two winning research papers make a substantial contribution to
understanding big picture, weighty issues for investors and the global
economy,” said Jon
, IRRCi executive director. “The winning academic paper
examines the stewardship of index funds that own an increasingly large
proportion of public companies. The winning practitioner research offers
an innovative data-driven model to measure the level of sustainable
investments in a portfolio. The authors make us think about how
investments interact with real world economic activity,” Lukomnik said.

The first winning research paper, Index Funds and the Future of
Corporate Governance: Theory, Evidence and Policy
, is
co-authored by Lucian Bebchuk, James Barr Ames Professor of Law,
Economics, and Finance, and Director of the Program on Corporate
Governance, Harvard Law School and Scott Hirst, Associate Professor,
Boston University School of Law and Research Director, Program on
Institutional Investors, Harvard Law School.

This paper studies the resources and decisions of index fund managers –
how they monitor, vote and engage with their portfolio companies. This
research provides an analytical framework for understanding the
incentives of index fund managers, provides the first comprehensive and
detailed empirical account of the full range of stewardship activities
that index fund managers do and do not undertake, and considers the
significant policy implications of the issues analyzed. Download the
research here.

“We are honored to have our work recognized by the IRRC Institute,” said
report co-author Lucian Bebchuk.

“Our work aims to highlight a key dimension of our corporate governance
system that deserves the close attention of policymakers and market
participants,” said report co-author Scott Hirst.

The second winning paper, Measuring the Sustainability Impact of
25 European ESG Funds
, is co-authored by Larry Abele and Antti
Savilaakso, both with Auriel Investors.

This research introduces a new quantitative data-driven model to measure
the level of sustainable investments in a portfolio as compared against
a benchmark by creating a measure called “active ESG (environmental,
social and governance) share” intended to quantify the impact of
sustainability considerations on the portfolio’s holdings. The research
then compares the active ESG share of 25 diversified European ESG funds.
It finds that these funds prioritize the provision of environmentally
and socially positive products and services by their portfolio
companies, but have lower board independence, gender equality and social
impacts than their benchmark. In general, the funds had an active ESG
share of only four to five percent, meaning that sustainability issues
only caused a four to five percent holding differential from a portfolio
that did not consider sustainability. Download the research here.

“We built the Impact-Cubed model to push for more accountability in the
sustainable and responsible investment community,” said report co-author
Antti Savilaakso. “The apparent lack of accountability as demonstrated
by our research waters down the potentially transformative power of
responsible investments when ESG funds are more green marketing than
real changes in how we invest. We are grateful for the recognition from
IRRCi, which reassures us that we are making a real and valuable
contribution to the industry.”

The research submissions were of such high quality that the judges
selected another research paper for Honorable Mention recognition,
Are Sustainability Factors Associated with Stock Price Informativeness
This research is authored by Zabihollah Rezaee, Professor, School of
Accountancy, University of Memphis. Download the research here.

The blue ribbon panel of judges
for the 2018 IRRC Institute Prize were:

  • Robert Dannhauser, Head of Capital Markets Policy, CFA Institute
  • James Hawley, Professor emeritus and former Director of the Elfenworks
    Center for Fiduciary Capitalism at St. Mary’s College of California
  • Erika Karp, Founder, CEO and Chair of the Board of Cornerstone Capital
  • Nell Minow, Governance Expert and Huffington Post Columnist

Biographies of the judges are available here.
Information on past winners is available here.
More information about the award is available here.
Read the full body of IRRCi research here.

The IRRCi is scheduled to dissolve by December 31, 2018. The John L.
Weinberg Center for Corporate Governance at the University of Delaware
will take over the award beginning in 2019, as well as sustain access to
the full body of IRRCi research.

The Investor Responsibility Research Center Institute is a
nonprofit research organization that funds academic and practitioner
research enabling investors, policymakers, and other stakeholders to
make data-driven decisions. IRRCi research covers a wide range of topics
of interest to investors, is objective, unbiased, and disseminated
widely. More information is available at


Kelly Kenneally |
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