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Title: Three essays in asset management : ethical and investment exclusions
Author: Atta-Darkua, Vaska Charlz
ISNI:       0000 0004 9348 2896
Awarding Body: University of Cambridge
Current Institution: University of Cambridge
Date of Award: 2019
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This dissertation contributes to the existing body of knowledge on ethical and investment exclusions. Accordingly, the first chapter examines the consequences of ethical exclusions from the point of view of excluded firms. Specifically, it makes use of the Norway GPFG's ethical exclusion announcements and documents a post-announcement negative return impact on firms' stock prices which is not reversed in the short term. Furthermore, I find that product exclusion announcements influence some ethics-sensitive investors who also divest negatively screened firms. Therefore, the chapter demonstrates that ethical exclusions can adversely affect firm equity value, at least in the short term. The second chapter examines the impact of sector exclusions on the portfolio of a long-term well-diversified investor. Using industry indices spanning 1900–2018, we identify a number of risks associated with sector exclusion strategies. Focusing on the part of the portfolio which is being substituted away from a given sector, we show that negative screenings can give rise to substantial drawdowns and unintended geographical tilts. We conclude that over the long run the consequences of sector exclusion for investors are likely to be non-trivial. The third chapter conducts a survey of industry professionals’ views on divestments. Respondents consider negative portfolio screenings most useful for attracting funds from ethically concerned investors and are least in favour of using them for risk management purposes. Furthermore, professionals express the lowest levels of disagreement about the expected returns of non-controversial sectors, relative to those of controversial sectors. We also classify respondents into clusters depending on their opinions regarding sector exclusions. Those who are divestment “sceptics” form risk estimates with higher resemblance to historic performances than divestment “devotees”. Overall, survey responses imply that exclusions scepticism does not stem from an expectation that controversial sectors have superior performance to non-controversial sectors.
Supervisor: Dimson, Elroy ; Chambers, Alan David Sponsor: University of Cambridge ; Economic and Social Research Council (ESRC)
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
Keywords: ethical investing ; equity value ; clientele change ; ethical behaviour ; institutional investors ; sovereign wealth funds ; sin stocks ; Divestment ; activism ; fossil fuel ; corporate social responsibility (CSR) ; environmental social and governance (ESG) ; negative screening ; Responsible investing ; Portfolio investment