We examine how mutual fund investors react to various ESG-related information by leveraging the staggered releases of ESG modules from a dominant financial data platform in China. We present causal evidence that superior flows to high-ESG mutual funds appeared after the platform provided aggregated fund-level ESG rating signals and concentrated at the top 2.5% funds with the AAA rating. The additional flows toward high-ESG funds are irrelevant to their historical ESG performance, and are more pronounced when these funds have lower alternative ESG ratings, higher rating uncertainty, and lower returns. These findings shed light on the behavior of investors, suggesting that they exhibit unsophisticated, inattentive, and non-pecuniary tendencies when making sustainable investments.
