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The Moskowitz Prize moves to Kellogg

Global prize for research in sustainable finance awarded for data-driven investigation of investor demand

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The Kellogg School of Management is now the host of the Moskowitz Prize, which is the premier global prize for research in sustainable finance and 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 prize was instituted in 1996 and had been hosted at Berkeley’s Haas School of Business for the past 24 years before moving to Kellogg. It was named after Milton Moskowitz (1932-2019), one of the field’s first and most innovative investigators. 

This year’s recipients of the prize are Lakshmi Naaraayanan (London Business School), Kunal Sachdeva (Rice University’s Jones Graduate School of Business) and Varun Sharma (London Business School) for their paper “The Real Effects of Environmental Activist Investing.”

Among this year’s Moskowitz Prize judges are Kellogg faculty members Mitchell Petersen, David Chen and Ravi Jagannathan, along with Dean Francesca Cornelli and Lloyd Kurtz. Kurtz founded the Moskowitz Prize and is a visiting scholar at Kellogg.

“The Moskowitz Prize winners have been some of the most influential people in environmental, social, governance investing and sustainable finance,” said Chen, a professor of finance and the faculty lead of impact investing at Kellogg. “Timing is everything. The topics covered by the Moskowitz Prize are now at the heart of the finance and investment world.”

The winners set out to provide evidence-based research on whether typical tools used by investors to engage with firms could be used successfully for environmental activism.

“Extensive research has documented the role of voice and exit by investors to improve the targeted firms' financial and operational performance,” said Sachdeva. “Traditionally, institutional investors have approached firms to demand changes with the primary goal of increasing shareholder wealth. Given this, we wanted to know: Can investors use their voice to affect a firm’s environmental performance? Do firms respond and how? Additionally, what are these effects, who benefits and what are the costs of these engagements for firms?”

“We wanted to paint this comprehensive picture of environmental activism that is growing in importance and quantify it,” Naaraayanan said.

To answer these questions, the authors used statistical methods to assess the impact of the engagement initiative of the New York City Pension System which targeted firms through its Boardroom Accountability Project. 

“The paper finds that the engagement initiative was effective: The manufacturing plants of targeted firms responded by reducing their overall toxic chemical releases by 13% on average,” said Jagannathan, a finance professor at Kellogg. “Further, the firms are not achieving this by moving their pollution to off-site locations for release or disposal. The improvements are primarily from reduction in stack-air greenhouse gas emissions. The findings in this study will help motivate other institutional investors and owners of money to come up with engagement initiatives of their own to encourage firms to do well by doing public good.”

“They’ve now put data behind the obvious,” Chen added. “The research of the last few years has put data behind what we’ve wanted to believe was true in ESG (Environmental, Social and Corporate Governance) and sustainability.”

The genesis of the prize began with Kurtz, who is head of social impact investing at Wells Fargo Private Wealth Management. Kurtz, who was an analyst at the time, was thinking through what the biggest problems were in sustainable investments. He determined, 25 years ago, that there weren’t enough empirical studies.

“We had a lot of ideology,” Kurtz said, “But what I wanted was data. Because what I find with ideology is that it typically retreats in the face of facts. And getting the right answer often clarifies the best way to approach a problem.”

Kurtz founded the Moskowitz Prize to solve for this problem.

Megan Kashner, Kellogg’s director of social impact, sees the Moskowitz Prize as a natural addition to the portfolio of programs that focus on impact finance. 

“Kellogg believes in expanding the field of sustainable investing,” Kashner said. “We lead the Kellogg-Morgan Stanley Sustainable Investing Challenge to expend learning and the Impact & Sustainable Finance Faculty Consortium to encourage advancements in teaching globally.”

For Kurtz, this move to host the prize at Kellogg aligns with how Kellogg has been developing initiatives in sustainable finance.

“I believe Kellogg has critical mass in sustainable finance,” Kurtz said. “To have a strong institution with such a large group of quality people working on these problems consistently is new, and frankly kind of astounding.”

For many at Kellogg, the Moskowitz Prize is a critical next step in Kellogg’s trajectory in sustainable finance. This trajectory began with expanding opportunities for students, who were wanting more exposure to this area, and now reaches students, faculty and practitioners globally.

To host the prize this year, Kellogg received sponsorship support from six major financial institutions, including Bailard, Breckinridge Capital and the Calvert Institute for Responsible Investing.

“With improved access to learning opportunities for students, expanded connections between academics, and intellectual and investigative expansion of the field’s knowledge base through top-notch research, Kellogg strives to foster progress in impact and sustainable finance across sectors and markets. The Moskowitz Prize fits squarely in our big-tent approach to field-building,” Kashner said. 

The trajectory continues by investing in and catalyzing research in this field globally.

“Kellogg expanded its investment in social finance curriculum with the creation of the Impact & Sustainable Finance Faculty Consortium in 2017,” Chen said. “We next saw the need for more research to develop data-grounded frameworks to explain key drivers of investments, impact and value. With the Moskowitz Prize, we are pushing the bounds of research in this area.”

The timing for taking the reins of the prize at Kellogg could not come at a more relevant time when sustainable finance is hitting the mainstream.

“This issue is now a global research concern,” said Chen, “and it’s also a global investment management concern. This prize allows us to continue that outreach and that connection across the world with top thinkers in fund management and top thinkers in investment research. We are not done, yet.”

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