In Holdings We Trust: Uncovering the ESG Fund Lemons

70 Pages Posted: 11 Apr 2022 Last revised: 13 Oct 2023

See all articles by Ivan Diaz-Rainey

Ivan Diaz-Rainey

Department of Accounting, Finance and Economics, Griffith Business School, Griffith University; University of Otago

Sebastian Gehricke

University of Otago

Lachie McLean

University of Otago

Quyen Nguyen

CEFGroup & Department of Accountancy and Finance, University of Otago

Renzhu Zhang

CEFGroup & Department of Accountancy and Finance, University of Otago

Date Written: March 6, 2022

Abstract

This paper explores potential greenwashing in the responsible investing (RI) landscape. We survey retail global equity funds in Australasia, our analysis has three components. First, we elicit how and why asset managers integrate ESG information into investment decisions showing that RI approaches were mainly motivated by performance and fund flows, or value, rather than ethical values. Second, we compared responses to the portfolio holdings data and found, contrary to our hypothesis, portfolio carbon intensity was not significantly lower for members of a climate initiative, for those that prioritised climate change themes or engaged in a decarbonisation strategy - with these results robust after controlling for ‘engagement’ strategies. The divergence between words and actions appears to be consistent with greenwashing funds (‘lemons’). Third, we compare ESG-named and non-ESG-named funds, for respondents and the full sample, to find that, contrary to our hypothesis, they had similar emissions intensities and ESG performance.

Keywords: ESG, Sustainable Investments, Greenwashing, Responsible Investments

JEL Classification: G11, G24, M14

Suggested Citation

Diaz-Rainey, Ivan and Gehricke, Sebastian and McLean, Lachie and Nguyen, Quyen and Zhang, Renzhu, In Holdings We Trust: Uncovering the ESG Fund Lemons (March 6, 2022). Available at SSRN: https://ssrn.com/abstract=4050964 or http://dx.doi.org/10.2139/ssrn.4050964

Ivan Diaz-Rainey

Department of Accounting, Finance and Economics, Griffith Business School, Griffith University ( email )

Australia

University of Otago ( email )

Dunedin
New Zealand

Sebastian Gehricke (Contact Author)

University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

Lachie McLean

University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

Quyen Nguyen

CEFGroup & Department of Accountancy and Finance, University of Otago ( email )

P.O. Box 56
Dunedin, Otago 9010
New Zealand

Renzhu Zhang

CEFGroup & Department of Accountancy and Finance, University of Otago ( email )

Dunedin
New Zealand
+64274917441 (Phone)

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