Discussion paper

DP18219 Green Tilts

We estimate financial institutions' portfolio tilts that relate to stocks' environmental, social, and governance (ESG) characteristics. In 2021, ESG-related tilts total 6% of the investment industry's assets and average 22% of institutions' total portfolio tilts. ESG tilts are larger for less-volatile stocks and for institutions with smaller size and greater active share, consistent with our theoretical predictions. Significant ESG tilts arise from the choice of stocks held and, especially, the weights on stocks held. The largest institutions tilt increasingly toward green stocks, while other institutions and households tilt increasingly brown. UNPRI signatories and European institutions tilt greener, banks browner.


Pástor, L, R Stambaugh and L Taylor (2023), ‘DP18219 Green Tilts‘, CEPR Discussion Paper No. 18219. CEPR Press, Paris & London. https://cepr.org/publications/dp18219