Do US Active Mutual Funds Make Good of Their ESG Promises? Evidence from Portfolio Holdings

Massimo Guidolin and Monia Magnani (monia.magnani@unibocconi.it)

No 24220, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: We investigate the occurrence of greenwashing in the US mutual fund industry. Using panel regression methods, we test whether there exist differences in the portfolio investment behaviours of active equity funds that are self-declared to be driven by ESG motives when compared to all other funds. In particular, we focus on two aspects of funds’ portfolio allocation decisions, i.e., the actual implied average ESG ratings of the stocks a mutual fund invests in and the portfolio share invested in sin stocks. We do not ??ind strong evidence that ESG and non-ESG funds make identical investment choices and hence reject the hypothesis of widespread greenwashing. ESG funds, on average, invest more in companies with higher ESG ratings and avoid sin stocks more than non-ESG funds. Nonetheless, we obtain evidence that some degree of greenwashing may still be occurring. However, over time, the differences between ESG and non-ESG funds in these behaviours seem have declined, suggesting a potential reduction in greenwashing practices

Keywords: greenwashing; US mutual funds; ESG ratings; sustainable investment; sin stocks (search for similar items in EconPapers)
JEL-codes: C59 G11 G12 G23 G24 (search for similar items in EconPapers)
Pages: 38
Date: 2024
New Economics Papers: this item is included in nep-env and nep-fmk
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Journal Article: Do US Active Mutual Funds Make Good of Their ESG Promises? Evidence from Portfolio Holdings (2024)
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