Do Responsible Investors Invest Responsibly?

We study whether institutional investors that sign the Principles for Responsible Investment (PRI), a commitment to responsible investing, exhibit better portfolio-level environmental, social, and governance (ESG) scores. Signatories outside of the USA have superior ESG scores than nonsignatories, but US signatories have at best similar ESG ratings, and worse scores if they have underperformed recently, are retail-client facing, and joined the PRI late. US signatories do not improve the ESG scores of portfolio companies after investing in them. Commercial motives, uncertainty about fiduciary duties, and lower ESG market maturity explain why US-domiciled PRI signatories do not follow through on their responsible investment commitments.