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

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

1 March 2024
Authors: Kayshani Gibbon (Utrecht University), Jeroen Derwall (Utrecht University/Maastricht University), Dirk Gerritsen (Utrecht University) and Kees Koedijk (Utrecht University/ CEPR)
Presenter: Kayshani Gibbon (Utrecht University)
Abstract:

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 740 ESG-related name changes between July 2016 and September 2022, we investigate investors’ response and fund managers’ behaviour in terms of fund flows, portfolio-level ESG metrics, portfolio turnover, and fees. Using difference-in-differences analysis and accounting for heterogeneous treatment effects, we provide mixed evidence on whether funds increase flows by renaming, although effects appear significant for funds domiciled in Europe. 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. Repurposing has no material impact on funds’ turnover rates and on fees. The results alleviate concerns that funds use ESG-oriented name changes cosmetically and imply that they are renaming with purpose.

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