Beyond Green Labels: Assessing Mutual Funds’ ESG Commitments through Large Language Models

Katherine Wood, Chaehyun Pyun and Hieu Pham

Finance Research Letters, 2025, vol. 74, issue C

Abstract: This paper investigates whether mutual funds that adopt ESG-related names follow through on the implied increase in ESG commitments. Utilizing Large Language Models (LLMs) to analyze mutual fund prospectuses, we find that, following a name change, funds increase their discussion of ESG and improve their holdings-based ESG scores. While we observe a positive correlation between a fund’s ESG content and its scores, the marginal benefit of additional ESG content diminishes post-name change. Our findings suggest that investors evaluating these funds can use LLMs to gauge a fund’s ESG commitment, especially when traditional ESG metrics are unavailable.

Keywords: Fund Names; ESG; Greenwashing; Large Language Models (search for similar items in EconPapers)
JEL-codes: G11 G23 M14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:74:y:2025:i:c:s1544612324017422

DOI: 10.1016/j.frl.2024.106713

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