DP19611 Socially Responsible Investing and Multinationals’ Pollution: Evidence from Global Remote Sensing Data
This paper investigates the impact of Socially Responsible Investment (SRI) capital on the polluting practices of industrial Multinational Enterprises (MNEs) across all their facilities. We leverage the inverse relation between local pollution and high-frequency satellite-based measurements of local vegetation health through the normalized difference vegetation index (NDVI). Our empirical analysis encompasses a comprehensive dataset of 911 parent companies and their 52,806 establishments worldwide. We estimate how within-location changes in NDVI relate to SRI ownership and find that greater SRI ownership is associated with improved vegetation health, consistent with lower pollution. This effect is concentrated in facilities located within OECD countries and increases with investor engagement intensity. By contrast, NDVI declines around non-OECD facilities of the same firms, pointing to pollution displacement abroad. These results suggest that active SRI investors can improve firms’ environmental outcomes, but global progress depends on mitigating cross-border shifts that may offset local gains.
