What Does ESG Investing Mean and Does It Matter Yet?

56 Pages Posted: 26 Jun 2023

See all articles by Abed El Karim Farroukh

Abed El Karim Farroukh

Indiana University - Kelley School of Business

Jarrad Harford

University of Washington; European Corporate Governance Institute (ECGI)

David (Dongheon) Shin

University of Oklahoma - Michael F. Price College of Business

Date Written: June 19, 2023

Abstract

We explore three ways to classify mutual funds as ESG-oriented: by their names, their voting records, and their holdings. ESG-named funds and ESG-voting funds tend to be smaller than non-ESG funds, and spread their investment over more individual companies. They never control more than a quarter of aggregate assets under management. Even taking a broad view of judging funds by the ESG scores of their holdings only increases this to about 33% of AUM. Voting in favor of costly shareholder E&S proposals is still rare, and the portfolio additions and deletions of ESG-oriented funds do not differ much from those of non-ESG funds. We conclude that it is surprisingly difficult to find evidence of any real impact of the talk about ESG-oriented investing, whether in voting or widespread and binding investment filters.

Keywords: Mutual funds, sustainable investing

JEL Classification: G23, Q01

Suggested Citation

Farroukh, Abed El Karim and Harford, Jarrad and Shin, David (Dongheon), What Does ESG Investing Mean and Does It Matter Yet? (June 19, 2023). Available at SSRN: https://ssrn.com/abstract=4484626 or http://dx.doi.org/10.2139/ssrn.4484626

Abed El Karim Farroukh (Contact Author)

Indiana University - Kelley School of Business ( email )

United States

HOME PAGE: http://https://sites.google.com/view/farroukh

Jarrad Harford

University of Washington ( email )

Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)

HOME PAGE: http://faculty.washington.edu/jarrad/

European Corporate Governance Institute (ECGI) ( email )

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

David (Dongheon) Shin

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

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