Personal Convictions and ESG Investing

39 Pages Posted: 8 Aug 2022

See all articles by Charlie Costello

Charlie Costello

Upstart Network Inc.

Rachel Li

Securities and Exchange Commission (SEC)

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies

Parth Venkat

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: July 15, 2022

Abstract

We study whether fund managers’ personal convictions regarding environmental causes relate to their investment decisions and performance, using vehicle purchases and charitable donations as proxies for managers’ convictions. We find that environmentally committed managers hold more of their portfolios in green stocks and perform significantly better among those holdings. This outperformance can be explained by superior characteristic selectivity, higher active share, and avoidance of large negative returns in green stocks. As such, environmentally committed mutual fund investors could consider managers’ personal convictions in addition to conventional fund-level environmental measures (e.g. disclosures, prior holdings, etc.) in selecting funds.

Keywords: ESG; Mutual Funds; Portfolio Choice; Fund Performance; Personal Convictions

JEL Classification: G11, G41

Suggested Citation

Costello, Charlie and Li, Rachel and Ray, Sugata and Venkat, Parth, Personal Convictions and ESG Investing (July 15, 2022). Available at SSRN: https://ssrn.com/abstract=4164204

Charlie Costello

Upstart Network Inc.

P.O. Box 1503
San Carlos, CA 94070
United States

Rachel Li

Securities and Exchange Commission (SEC) ( email )

100 F St NE
Washington, DC 20549-1105
United States

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Parth Venkat (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

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