Are Investors Aware of Climate-Related Transition Risks? Evidence from Mutual Fund Flows

44 Pages Posted: 21 Oct 2020 Last revised: 6 Sep 2022

See all articles by Juan C. Reboredo

Juan C. Reboredo

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies

Luis Otero

Department of Accounting and Finance, University of Santiago de Compostela

Date Written: September 3, 2020

Abstract

Using information on climate transition risks embedded in US equity mutual fund portfolios, we report evidence that mutual fund investors consider climate-related transition risk to be an undesirable fund feature and accordingly allocate more money to funds with lower climate-related transition risk. The size of the impact of this risk on fund flows differs depending on the performance expectations of investors, the socially responsible focus and the sustainability of the fund. Our results suggest that mutual fund investors are aware of climate-related transition risks as evidenced by their investment decisions.

Keywords: Carbon transition risk, mutual funds, manager ownership, socially responsible investment, mutual fund performance, mutual fund flows

JEL Classification: G11, G23, Q51

Suggested Citation

Reboredo, Juan C. and Otero, Luis, Are Investors Aware of Climate-Related Transition Risks? Evidence from Mutual Fund Flows (September 3, 2020). Ecological Economics, Vol. 189, No. 107148, 2021, Available at SSRN: https://ssrn.com/abstract=3685675 or http://dx.doi.org/10.2139/ssrn.3685675

Juan C. Reboredo

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies ( email )

Avda. Juan XXIII s/n
Santiago, A Coruña 15704
Spain

Luis Otero (Contact Author)

Department of Accounting and Finance, University of Santiago de Compostela ( email )

Complejo Docente - Campus Universitario de Lugo
Lugo, A Coruña 15704
Spain

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