The Moskowitz Prize is awarded each year to the paper best representing outstanding research on sustainable and responsible investing and the financial implications of responsible business practices in capital markets.
The Moskowitz Prize recognizes outstanding quantitative research papers that are relevant to investment practitioners in sustainable and responsible finance. Although the prize is usually awarded to a finance paper, past winners have been from the fields of economics and management as well.
The prize is named for Milton Moskowitz (1932-2019), one of the field’s first and most innovative investigators, whose pioneering legacy continues through the Moskowitz Prize. In 2020 the Moskowitz Prize became an initiative of Northwestern University’s Kellogg School of Management. First presented in 1996 by the U.S. Social Investment Forum, the Prize was awarded by UC Berkeley's Haas School of Business from 2005-2019. Kellogg is honored to carry forward the legacy of work that has made the Prize the most prestigious research award in sustainable finance.
The winning paper author(s) will receive a monetary award of $7,500, while the runner-up paper’s author(s) will receive a monetary award of $2,500.
The winning paper’s authors will be invited to present to the global Impact & Sustainable Finance Faculty Consortium. Reasonable travel expenses will be covered. The Journal of Investing customarily accepts the winning paper for publication, although this is not a requirement or certainty and occurs at the discretion of the author.
Submissions for the 2022 Prize are now open. Submissions are due by midnight central time on June 30.
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From a field of over 170 submitted papers, Corporate ESG Profiles and Investor Horizons was selected as the winner of the 2021 Moskowitz Prize at Northwestern University. This honor for outstanding and important research in sustainable finance was bestowed on authors Laura Starks from the University of Texas McCombs School of Business, Parth Venkat from the University of Alabama Culverhouse School of Business, and Qifei Zhu from Nanyang Business School.
Professor of the Practice of Economics and co-Director, Consortium for Data Analytics in Risk, UC Berkeley;
Managing Director and Head of Research, Aperio Group at BlackRock
Honorable Mention: Yongtae Kim, Santa Clara University and Meir Statman, Santa Clara University for “Do Corporations Invest Enough In Environmental Responsibility?“
Typical socially responsible investors tilt their portfolios toward stocks of companies with high scores on social responsibility characteristics such as community, employee relations and the environment. We analyze returns during 1992-2007 of stocks rated on social responsibility by KLD and find that this tilt gave socially responsible investors a return advantage relative to conventional investors. However, typical socially responsible investors also shun stocks of companies associated with tobacco, alcohol, gambling, firearms, military, and nuclear operations. We find that such shunning brought to socially responsible investors a return disadvantage relative to conventional investors. The return advantage of tilts toward stocks of companies with high social responsibility scores is largely offset by the return disadvantage that comes from the exclusion of stocks of 'shunned' companies. The return of the DS 400 Index of socially responsible companies was approximately equal to the return of the S&P 500 Index of conventional companies.
Socially responsible investors can do both well and good by adopting the best-in-class method in the construction of their portfolios. That method calls for tilts toward stocks of companies with high scores on social responsibility characteristics, but refrains from calls to shun the stock of any company, even one that produces tobacco.
Read The Wages Of Social Responsibility
Honorable Mention: Javier Gil-Bazo, Pablo Ruiz-Verdu, and Andre A. P. Santos, Universidad Carlos III de Madrid for “The Performance Of Socially Responsible Mutual Funds: The Role Of Fees And Management Companies“
This paper analyzes the relationship between employee satisfaction and long-run stock returns. A value-weighted portfolio of the "100 Best Companies to Work For in America" earned an annual four-factor alpha of 3.5% from 1984-2009, and 2.1% above industry benchmarks. The results are robust to controls for firm characteristics, different weighting methodologies and the removal of outliers. The Best Companies also exhibited significantly more positive earnings surprises and announcement returns. These findings have three main implications. First, consistent with human capital-centered theories of the firm, employee satisfaction is positively correlated with shareholder returns and need not represent managerial slack. Second, the stock market does not fully value intangibles, even when independently verified by a highly public survey on large firms. Third, certain socially responsible investing ("SRI") screens may improve investment returns.
Read Does The Stock Market Fully Value Intangibles? Employee Satisfaction And Equity Prices
Honorable Mention: Allen Goss, Ryerson School of Management, for “Corporate Social Responsibility and Financial Distress.“
Many public pension funds engage in institutional activism. These funds use the power of their pooled ownership of publicly traded stocks to affect changes in the corporations they own. I review the theory and empirical evidence underlying the motivation for institutional activism. In theory, the merits of institutional activism hinge critically on two agency costs: (1) the conflicts of interest between corporate managers and shareholders, and (2) the conflicts of interest between portfolio managers and investors. This leads to two types of institutional activism: shareholder activism and social activism. While portfolio managers can use their position to monitor conflicts that might arise between managers and shareholders (shareholder activism), they can also abuse their position by pursuing actions that advance their own moral values or political interests at the expense of investors (social activism). Which of these effects dominates the actions of portfolio managers will determine the value of activism and is an empirical issue. Perhaps the most high profile activism has been pursued by CalPERS with their annual focus list. I document that CalPERS has pursued reforms at focus list firms that would increase shareholder rights and (imprecisely) estimate the total wealth creation from this shareholder activism to be $3.1 billion between 1992 and 2005. Unrelated to the focus list program, CalPERS has also pursued social activism (e.g., the divestment of tobacco stocks). In general, I argue that institutional activism should be limited shareholder activism where there is strong theoretical and empirical evidence indicating the proposed reforms will increase shareholder value. At times, institutions will be forced to take engage in social activism and take positions on sensitive issues. In these situations, I argue portfolio managers should pursue the moral values or political interests of their investors rather than themselves.
Read Monitoring The Monitor: Evaluating CalPERS’ Shareholder Activism
Honorable Mention: Harrison Hong, Princeton University, and Marcin Kacpercyzk, New York University for “The Price of Sin: The Effects of Social Norms on Markets"; Baruch Lev, New York University, Christine Petrovits, William and Mary School of Business, and Suresh Radhakrishnan, Jindal School of Management for "Is Doing Good Good for You? Yes, Charitable Contributions Enhance Revenue Growth."
This study adds new insights to the long-running corporate environmental-financial performance debate by focusing on the concept of eco-efficiency. Using a new database of eco-efficiency ratings, we analyze the relation between eco-efficiency and financial performance from 1997 to 2004. We report that eco-efficiency relates positively to operating performance and market value. Moreover, our results suggest that the market's valuation of environmental performance has been time variant, which may indicate that the market incorporates environmental information with a drift. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time. Our results have implications for company managers, who evidently do not have to overcome a tradeoff between eco-efficiency and financial performance, and for investors, who can exploit environmental information for investment decisions.
Read The Economic Value Of Corporate Eco-Efficiency
Honorable Mention: Meir Statman, Santa Clara University’s Leavey School of Business for “Socially Responsible Indexes: Composition, Performance, And Tracking Errors“
Most theorizing on the relationship between corporate social/environmental performance (CSP) and corporate financial performance (CFP) assumes that the current evidence is too fractured or too variable to draw any generalizable conclusions. With this integrative, quantitative study, we intend to show that the mainstream claim that we have little generalizable knowledge about CSP and CFP is built on shaky grounds. Providing a methodologically more rigorous review than previous efforts, we conduct a meta-analysis of 52 studies (which represent the population of prior quantitative inquiry) yielding a total sample size of 33,878 observations. The meta-analytic findings suggest that corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility is likely to pay off, although the operationalizations of CSP and CFP also moderate the positive association. For example, CSP appears to be more highly correlated with accounting-based measures of CFP than with market-based indicators, and CSP reputation indices are more highly correlated with CFP than are other indicators of CSP. This meta-analysis establishes a greater degree of certainty with respect to the CSP-CFP relationship than is currently assumed to exist by many business scholars.
Read Corporate Social And Financial Performance: A Meta-Analysis
Honorable Mention: Nicholas P.B. Bollen, and Mark A. Cohen, Vanderbilt University for “Mutual Fund Attributes and Investor Behavior“
Using firm-level data from 44 countries, we investigate the relation between corruption and international corporate values. Our analysis shows that firms from more corrupt countries trade at significantly lower market multiples. The effect is both economically and statistically significant. Furthermore, using a two-stage estimation procedure, we show that corruption impacts firm value primarily through lower expected future cash flows, most directly captured by firms' profitability forecasts. Collectively, our evidence shows corruption has significant economic consequences for shareholder value.
Read Corruption And International Valuation: Does Virtue Pay?
Honorable Mention: Christopher C. Geczy, Robert F. Stambaugh, and David Levin, University of Pennsylvania, The Wharton School for “Investing In Socially Responsible Mutual Funds“
Using an international database containing 103 German, UK and US ethical mutual funds we review and extend previous research on ethical mutual fund performance. By applying a multi-factor Carhart (1997) model we solve the benchmark problem most prior ethical studies suffered from. After controlling for investment style, we find little evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990-2001 period. Introducing time-variation in betas however leads to a significant under-performance of domestic US funds and a significant out-performance of UK ethical funds, relative to their conventional peers. Finally, we differentiate previous results by documenting a learning effect. After a period of strong under-performance, older ethical funds finally are catching up, while younger funds continue to under-perform both the index and conventional peers.
Read International Evidence On Ethical Mutual Fund Performance And Investment Style
Arguments can be made on both sides of the question of whether a stringent global corporate environmental standard represents a competitive asset or liability for multinational enterprises (MNEs) investing in emerging and developing markets. Analyzing the global environmental standards of a sample of U.S.-based MNEs in relation to their stock market performance, we find that firms adopting a single stringent global environmental standard have much higher market values, as measured by Tobin's q, than firms defaulting to less stringent, or poorly enforced host country standards. Thus, developing countries that use lax environmental regulations to attract foreign direct investment may end up attracting poorer quality, and perhaps less competitive, firms. Our results also suggest that externalities are incorporated to a significant extent in firm valuation. We discuss plausible reasons for this observation.
“Do Corporate Environmental Standards Create Or Destroy Market Value?”
Honorable Mention: Bernell K. Stone, Brigham Young University, John B. Guerard, McKinley Capital Management, LCC, and Mustafa N. Gultekin, University of North Carolina for “Socially Responsible Investment Screening: Strong Evidence Of No Significant Cost For Actively Managed Portfolios“
This report demonstrates how environmental issues can successfully be integrated into financial analysis. It explains a newly developed methodology derived from fundamental principles of financial analysis and demonstrates the approach by applying it empirically to companies in the U.S. pulp and paper industry. The results show clearly that companies within this industry face environmental risks that are of material significance and that vary widely in magnitude from firm to firm. These risks are not evident in companies’ financial statements nor are they likely
Read Pure Profit: The Financial Implications Of Environmental Performance
Governments and vocal institutional shareholders have been exerting pressure on companies they deem to have objectionable operations (such as tobacco or chemical producers). This paper studies the effect of the most important legislative and shareholder boycott to date, the boycott of the South Africa's apartheid regime. We find that the announcement of legislative/shareholder pressure of voluntary divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. There is weak evidence that institutional shareholdings increased when corporations divested. In sum, despite the public significance of the boycott and the multitude of divesting companies, financial markets seem to have perceived the boycott to be merely a "sideshow."
Read The Effect Of Socially Activist Investment Policies On the Financial Markets: Evidence From The South African Boycott
Drawing on the resource-based view of the firm, we posited that environmental performance and economic performance are positively linked and that industry growth moderates the relationship, with the returns to environmental performance higher in high-growth industries. We tested these hypotheses with an analysis of 243 firms over two years, using independently developed environmental ratings. Results indicate that "it pays to be green" and that this relationship strengthens with industry growth. We conclude by highlighting the study's academic and managerial implications, making special reference to the social issues in management literature.
Read A Resource-Based Perspective On Corporate Environmental Performance And Profitability
For years scholars have been engaged in a seemingly endless and largely frustrating studies of the relationship between the social and financial performance of the corporation. The bulk of empirical research on corporate social performance (CSP) has addressed a hypothesized relationship between CSP and financial performance. The results of these studies attempting to link "socially responsible" behaviors to either market or accounting based measures of firm performance have been ambiguous at best, partly because of methodological problems related to the measurement of CSP and partly because the relationship itself is unclear. Financial data are, of course, readily available, reasonably consistent, and relatively easily measurable. CSP, on the other hand, has been ill-defined and measured in a wide range of ways. Many past studies have used different measures as proxies for CSP, which inadequately reflect its breadth as a concept. Finally, scholars have focused to date primarily on the question "Is financial performance related to social performance?" We argue for a reformulation of the question that emphasizes the link between social performance and the way an organization is managed, i.e., that explicitly focuses on stakeholder relations.
Read Finding The Link Between Stakeholder Relations And Quality Of Management
In this study we address three questions concerning socially responsible investing. First, is the average return of a socially screened equity universe statistically different from the average return of an unscreened universe for the 1987–94 period? Second, do analysts' earnings per share forecasts aid a manager in selecting stocks in socially screened and unscreened universes? Third, can one use an expected return model incorporating both value and growth components to select stocks and create portfolios in the socially screened and unscreened equity universes such that one can outperform both universe benchmarks? We find no statistically significant differences in the mean returns of unscreened and screened equity universes for the 1987–94 period. Earnings forecasts and the knowledge of those forecasts add value in the creation of portfolios. We find few statistically significant differences in the predictive power of the composite model to select stocks in both unscreened and screened equity universes. The estimated composite model offers the potential for substantial outperformance of socially screened and unscreened equity universes.
Read Is There A Cost To Being Socially Responsible In Investing?