Mutual Fund Trading, Greenwashing, and ESG Clientele

60 Pages Posted: 23 Aug 2021 Last revised: 26 Mar 2024

See all articles by Rui A. Albuquerque

Rui A. Albuquerque

Boston College, Carroll School of Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Yrjo Koskinen

Haskayne School of Business, University of Calgary; European Corporate Governance Institute (ECGI)

Raffaele Santioni

Bank of Italy

Multiple version iconThere are 3 versions of this paper

Date Written: March 18, 2024

Abstract

This paper studies trading by equity mutual funds comparing Environmental, Social and Governance (ESG) funds with conventional funds, using the COVID-19 market crash as a quasi-natural experiment to test funds’ commitment to ESG strategies. Funds that disclosed their ESG orientation in their prospectuses increased their portfolio weight of non-ES stocks. In contrast, funds with High Globe ratings or Low Carbon designation from Morningstar maintained a stable portfolio weight in ES stocks in response to fund flows during the crash. Results are consistent with ESG prospectus funds engaging in greenwashing. There is no evidence of widespread greenwashing by the other ESG funds.

Keywords: Environmentalandsocialresponsibility,clienteleeffects,investorhorizon,fund flows, greenwashing

JEL Classification: G01, G12, G23, G32, M14

Suggested Citation

Albuquerque, Rui A. and Koskinen, Yrjo J and Santioni, Raffaele, Mutual Fund Trading, Greenwashing, and ESG Clientele (March 18, 2024). European Corporate Governance Institute – Finance Working Paper No. 782/2021, Available at SSRN: https://ssrn.com/abstract=3908464 or http://dx.doi.org/10.2139/ssrn.3908464

Rui A. Albuquerque (Contact Author)

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://sites.google.com/view/ruialbuquerque/home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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

Yrjo J Koskinen

Haskayne School of Business, University of Calgary ( email )

SH 154, 2500 University Drive NW
Calgary, Alberta T2N 1N4
Canada
+1-403-220-5540 (Phone)

HOME PAGE: http://https://profiles.ucalgary.ca/yrjo-koskinen

European Corporate Governance Institute (ECGI) ( email )

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

HOME PAGE: http://https://ecgi.global/users/yrj%C3%B6-koskinen

Raffaele Santioni

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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