Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows
61 Pages Posted: 9 Aug 2017 Last revised: 11 Apr 2019
Date Written: March 25, 2019
Examining a shock to the salience of the sustainability of the US mutual fund market, we present causal evidence that investors marketwide value sustainability. Being categorized as low sustainability resulted in net outflows of more than $12 billion while being categorized as high sustainability led to net inflows of more than $24 billion. Experimental evidence suggests that sustainability is viewed as positively predicting future performance, but we do not find evidence that high sustainability funds outperform low sustainability funds. The evidence is consistent with positive affect influencing expectations of sustainable fund performance and non-pecuniary motives influencing investment decisions.
Keywords: Sustainability, Behavioral Finance, Fund Flows, Mutual Funds, Salience, Rank
JEL Classification: D03, G02, G12, G23
Suggested Citation: Suggested Citation