Do Sustainability Ratings Matter? Evidence from Private Wealth Investment Flows

72 Pages Posted: 11 May 2020 Last revised: 23 Mar 2022

See all articles by Amir Amel-Zadeh

Amir Amel-Zadeh

University of Oxford - Said Business School

Rik Lustermans

Vrije Universiteit Amsterdam, School of Business and Economics

Mary Pieterse-Bloem

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM)

Date Written: March 23, 2022

Abstract

This study examines the effect of sustainability ratings on investors’ asset allocation decisions. Using a proprietary dataset of monthly equity and bond holdings of European private wealth investors, we document significantly larger investment flows into assets with high sustainability ratings compared to those with low ratings. We further find that investors react to changes in sustainability ratings of their portfolio assets by rebalancing their portfolios towards assets with higher sustainability ratings. Exploiting a quasi-exogenous shock to the salience of sustainability ratings we document a plausibly causal effect of assets' sustainability ratings on wealthy retail investors' investment decisions. We do not find that the larger investments into assets with high sustainability ratings can be explained by differences in attention or news flow, or that they are due to significant differences in financial performance.

Keywords: ESG ratings, sustainable investing, retail investors, private wealth, asset allocation, investment flows

JEL Classification: G11, G14, G15, G29, G41, G50

Suggested Citation

Amel-Zadeh, Amir and Lustermans, Rik and Pieterse-Bloem, Mary, Do Sustainability Ratings Matter? Evidence from Private Wealth Investment Flows (March 23, 2022). Available at SSRN: https://ssrn.com/abstract=3576687 or http://dx.doi.org/10.2139/ssrn.3576687

Amir Amel-Zadeh (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Rik Lustermans

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Mary Pieterse-Bloem

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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