 The impact of ESG investment on fund performance: Evidence from mutual fund style driftJiayu Lin, Dongliang Pan and Yezhou Sha Pacific-Basin Finance Journal, 2025, vol. 91, issue C Abstract: This study analyzes the impact of ESG investment on fund performance using a sample of China's open-end mutual funds from January 2006 to December 2020. ESG investment style scores were constructed based on portfolio weights and MSCI ESG investment styles. The results show a significant positive correlation between overall ESG investment styles (including the environmental, social, and governance sub-dimensions) and fund performance. After adjusting for four-factor risk, the High-Low strategy (Long-short) yielded monthly excess returns ranging from 0.371% to 0.465%. After considering different degrees of style drift, the funds with lower style drift experienced a stronger positive impact from ESG investment styles, with the High-Low strategy contributing up to 0.615% in monthly excess returns. These findings offer practical strategies for fund managers to optimize portfolio allocation and provide valuable guidance for investors selecting ESG-style funds. This study provides theoretical and empirical support for sustainable finance development in emerging markets. Keywords: ESG investment; Style drift; Mutual fund; Portfolio optimization (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:91:y:2025:i:c:s0927538x25000447 DOI: 10.1016/j.pacfin.2025.102707 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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