Many institutional investors publicly commit to some form of responsible investment. This raises concerns about the credibility of such claims. We use participation in collaborative engagements to identify ``Leaders’’, i.e., institutional investors that are truly committed to improving firms' sustainability outcomes. Despite owning only 2.2% of the average firm, Leaders alone explain the positive relationship between institutional ownership and firms’ environmental and social performance. In line with committed owners facilitating corporate change, engagement campaigns are successful only when targeted firms are substantially owned by Leaders. We also find that these firms are less at risk of experiencing negative incidents.

We propose a new performance attribution framework that decomposes a constrained portfolio's holdings, expected utility, expected returns, variance, and realized returns into components attributable to: (1) the unconstrained mean-variance optimal portfolio; (2) individual static constraints; and (3) information, if any, arising from those constraints. A key contribution of our framework is the recognition that constraints may contain information that is correlated with returns, in which case imposing such constraints can affect performance. The excess return from information is positive (negative) when this correlation is positive (negative) and the constraint is binding. The excess variance of a portfolio is negative when the holdings of a shrinkage portfolio and the holdings attributable to constraints are positively correlated, and the degree to which variance is reduced depends on the squared correlation between returns and constraints. We provide simulated and empirical examples involving constraints on ESG portfolios. Contrary to conventional wisdom, constraints may improve portfolio performance under certain scenarios.

We develop a novel measure of disagreement in voice between active and passive mutual funds using their proxy votes that captures shareholder conflicts in public firms. We show that the disagreement in voice between passive and active mutual funds destroys firm value and suggest that the firm value loss is due to conflicting incentives between the two groups of mutual funds. Using Federal Open Market Committee announcements with press conferences as events that create scope for investors to make informed votes and interpret news differently for individual firms, we show that such value-destroying effect of disagreement is likely causal.