In Holdings We Trust: Uncovering the ESG Fund Lemons
70 Pages Posted: 11 Apr 2022 Last revised: 13 Oct 2023
Date Written: March 6, 2022
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: Suggested Citation