Renaming with purpose: Investor response and fund manager behaviour after fund ESG-renaming

Motivated by concerns that mutual funds’ stated integration of environmental, social and governance (ESG) criteria in investing is cosmetic, we study the widespread phenomenon that mutual funds change their name to include ESG-related appellations. Using a unique global sample of ESG-related name changes by 740 retail and 317 institutional share classes between July 2016 and September 2022, we investigate investors’ response and fund managers’ behaviour in terms of fund flows, portfolio-level ESG metrics and fees. Using difference-in-differences analyses and accounting for heterogeneous treatment effects, we provide mixed evidence on whether funds increase flows by renaming. We subsequently document that fund managers do improve the ESG performance, reduce exposure to controversial businesses, decrease the carbon intensity, and lower the overall ESG risks of their portfolios after ESG renaming. Renaming has no material impact on funds’ expenses. The results imply funds are renaming with purpose.