The Impact of Fund Flows on ESG Returns

Specialeforsvar: Frederikke Dian Therkelsen og Freja Høst-Madsen

Titel: The Impact of Fund Flows on ESG Returns

Abstract: This paper explores the impact of flow-driven price pressure on sustainable investing performance, by following the method suggested by van der Beck (2022). A measure of perceived sustainability based on mutual fund holdings is created. The study shows that this measure is consistent with more established sustainability measures such as ESG scores and carbon emissions.
Using a structural logit model and empirical estimation based on quarterly trades identified from 13F holdings reports, the study suggests that investors in green stocks are generally less elastic than investors in other stocks. Moreover, spillover effects have a considerable impact on ESG returns, with the overall market value of green stocks increasing by approximately 0.2 percent when 1 USD is withdrawn from the market portfolio and reinvested in the ESG portfolio.

Vejleder: Rolf Poulsen
Censor:   Kim Christensen, Aarhus Universitet