Awareness of the systemic challenges posed by environmental and social issues has
driven regulatory action undertaken at the EU level more strongly by far than in any
other jurisdiction. Some pieces of regulation adopted under the umbrella of the socalled
European Green Deal rely on institutional investors to drive a shift towards
sustainable finance. But in spite of the growing practical relevance of active share
ownership, including in its environmental and social dimensions, whether institutions
are motivated, and are actually able, to effectively play such crucial a role
remains controversial. Even assuming they were committed to not just cosmetically
address environmental and social issues, still there are limitations to the reasonable
reach of investor action in face of the scale of the challenges at stake. Limitations not
only derive from the deficient incentives structure and the collective action issues
that are typical of asset managers. They also depend on factors not in control of the
asset manager, such as varying end-investor preferences and availability of better
ESG data and information. The problem of divergent, and opaque, ESG ratings and
indices couples with that of non-consistent frameworks for corporate sustainability
disclosures, and the underlying differing concepts of materiality, making it hard for
investors to resort to reliable yet essential information they need to properly perform
sustainability assessments. Some skepticism concerning institutions’ disposition to
sustainability seems to be justified also where evidence referring to their actual voting
behavior at investee firms is considered.