Does Paying Passive Managers to Engage Improve ESG Performance?

Does Paying Passive Managers to Engage Improve ESG Performance?

Marco Becht, Julian Franks, Hideaki Miyajima, Kazunori (Icko) Suzuki

Series number :

Serial Number: 

Date posted :

July 11 2023

Last revised :

September 13 2023
SSRN Share


  • ESG • 
  • active ownership • 
  • Investor Stewardship • 
  • engagement • 
  • ESG indexes • 
  • passive managers • 
  • portfolio tilting

The paper studies a natural experiment in responsible investment conducted by the Japanese Government Pension Investment Fund (GPIF). In 2018 GPIF gave its largest passive manager a remunerated mandate to engage with portfolio companies to improve environmental, social and governance performance.

The fund adopted best-in-class indexes, rewarding companies with high ESG scores with additional equity investment. Using private data and difference-in-differences analysis we show that engagement by the asset manager has improved scores. In an event study, we find that the conditional portfolio tilt significantly impacts share prices. We also provide evidence that ESG scores for the Japanese stock market increased significantly more during the treatment period than most those of companies in other countries.


Real name:
Fellow, Research Member, Board Member
Solvay Brussels School for Economics and Management, Université libre de Bruxelles
Real name:
Hideaki Miyajima
Waseda University