The sustainability trap: Active fund managers between ESG investing and fund overpricing

Yannik Bofinger, Kim J. Heyden, Björn Rock and Christina Bannier

Finance Research Letters, 2022, vol. 45, issue C

Abstract: This study examines the relation between a fund’s environmental, social and governance (ESG) rating and active fund investment skill. We find that higher ESG ratings are associated not only with higher overpricing in the fund. Rather, higher sustainability of the fund also leads to higher overpricing in the fund even relative to its benchmark. Pursuing higher fund sustainability hence leads to active fund overpricing which is typically interpreted as low investment skill.

Keywords: ESG; Sustainability; Mutual funds; Mispricing; Active fund overpricing; Fund investment skill (search for similar items in EconPapers)
JEL-codes: G11 G23 M14 Q56 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002397

DOI: 10.1016/j.frl.2021.102160

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