Liberal politicians more likely to make sustainable investments

Study finds political ideology is backed up by investment behaviour

Liberal politicians more likely to make sustainable investments
Steve Randall

Politicians are great at talking the talk when it comes to changing the world but do they back that up by making sustainable investments?

Yes, according to recent research from the North Carolina State University.

Researchers in the university’s Poole College of Management looked at the voting records of US senators and representatives who served between 2004 and 2012.

“We wanted to know the extent to which political ideology informed investment decision-making, and publicly elected officials serve as a good case study,” said Jesse Ellis, co-author of the study and an associate professor of finance. The research was done with collaborators at Elon University and Heriot-Watt University.

Using public disclosure statements to determine investment holdings and the DW-NOMINATE database which gives and ideology score to voting records, the researchers found a clear pattern.

Liberal lawmakers were more likely to invest in socially responsible companies and the more liberal a lawmaker was, the larger the percentage of the lawmaker’s investment portfolio that was made up of socially responsible stocks.

The opposite was true for more conservative politicians.

“These findings held true across the political spectrum but were particularly pronounced for those legislators at the extreme ends of the political spectrum,” Ellis says. “We also found that, among all the factors that contribute to a company’s social responsibility score, environment, employee relations and diversity were the most closely associated with investment by liberal lawmakers.”

Social ventures affected by political leaning

Ellis says that the study suggests that the political landscape could determine the success of socially responsible ventures.

“If liberalism increases, these companies will do well; if conservatism rises, the fortunes of these companies could suffer,” he said.

The paper, “Do Politicians ‘Put Their Money Where Their Mouth Is?’ Ideology and Portfolio Choice,” is published in the journal Management Science.