Low-carbon Mutual Funds

67 Pages Posted: 19 Feb 2020 Last revised: 19 Feb 2021

See all articles by Marco Ceccarelli

Marco Ceccarelli

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Stefano Ramelli

University of Zurich - Department of Banking and Finance

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: February 11, 2021

Abstract

Low-carbon mutual funds allow investors to purchase lower exposure to climate change risk at the cost of lower sectoral diversification. On balance, this proposition proves to be appealing for investors, as seen from the effect on fund flows of the introduction of Morningstar's "Low Carbon Designation", and of subsequent updates. Active funds that missed the label at its initial release later shifted their holdings towards less carbon-intensive firms. The competition of intermediaries for investment flows along climate performance can thus have far-reaching consequences for investors.

Keywords: Behavioral finance, climate change, eco-labels, investor preferences, mutual funds, sustainable finance

JEL Classification: D03, G02, G12, G23

Suggested Citation

Ceccarelli, Marco and Ramelli, Stefano and Wagner, Alexander F., Low-carbon Mutual Funds (February 11, 2021). Swiss Finance Institute Research Paper No. 19-13, European Corporate Governance Institute – Finance Working Paper No. 659/2020, Available at SSRN: https://ssrn.com/abstract=3353239 or http://dx.doi.org/10.2139/ssrn.3353239

Marco Ceccarelli

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

HOME PAGE: http://sites.google.com/view/marcoceccarelli

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Stefano Ramelli

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41446342953 (Phone)

HOME PAGE: http://https://sites.google.com/view/stefanoramelli/about

Alexander F. Wagner (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

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