Research Details

Abstract

We analyze active managers’ commitment to ESG using United Nations Principles for Responsible Investment (PRI), which is the largest global initiative to incorporate ESG. We find a significant increase in fund flow to signatory funds regardless of their prior fund-level ESG score. However, signatories do not improve fund-level ESG score while exhibiting a decrease in return. Further, they vote less on environmental issues and stocks in their portfolio experience increased environmental controversies. Funds that are smaller, younger, and had higher historical alpha are more likely to sign PRI. Also, funds that had high ESG score are not more likely to sign the PRI. Lastly, only quant-driven and institution-only funds improve ESG post signing. Overall, only a small number of funds improve ESG while many others use the PRI status to attract capital without making notable changes to ESG.

Type

Article

Author(s)

Aaron Yoon, Soohun Kim

Date Published

2021

Citations

Yoon, Aaron, and Soohun Kim. 2021. Analyzing Active Mutual Fund Managers' Commitment to ESG: Evidence from the United Nations Principles for Responsible Investment. Management Science.