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Economics Job Talk

Thursday, January 18, 2024
4:00pm to 5:00pm
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Baxter B125
How Anti-ESG Pressure Affects Investment: Evidence from Retirement Savings
Jane Danyu Zhang, Ph.D. Candidate in Finance, UCLA Anderson School of Management,

Abstract: In this paper, I study how the political environment impacts the availability of ESG options to individuals. I establish the following judicial channel: because the respect of fiduciary duty is adjudicated by politically-oriented judges, some retirement plans are reluctant to offer ESG options due to litigation risk. I document that there is a significant gap in ESG offerings in retirement plans between conservative and liberal judicial circuits, that is only partially explained by demographic characteristics, firm characteristics, and local political preferences. With a decrease in judicial discretion, which reduces the influence of judges' political orientations, retirement plans face more uniform treatment between judicial circuits. This closes a substantial share of the gap in the ESG market between jurisdictions, and employees in conservative areas increase their ESG investments more than employees in liberal areas. I find that this effect is mostly driven by green firms, small firms, and firms located in the liberal counties of conservative circuits. Additionally, adding ESG options to the menu leads employees to contribute more overall to their retirement plans.

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