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Pro-Climate Securities Lending Styles
1 : Monash university
Using novel position-level securities lending data, I estimate the pro-climate securities lending styles among US passive equity funds, defined as a fund's preference for lending shares of brown stocks in the portfolio. Funds managed by politically liberal portfolio managers and those affiliated with UNPRI signatories exhibit markedly stronger pro-climate lending styles. While consistently lending brown stocks, pro-climate lenders also recall these shares before record dates to exercise voting rights, particularly when their votes are likely to be influential. Pro-climate lending styles have significant asset pricing implications; ownership by pro-climate lenders affects short-sale constraints, market quality, and information efficiency for brown stocks. These findings offer new insights into how passive funds can leverage securities lending to express and promote non-pecuniary preferences.
