Different Shades of ESG Funds

Abstract:

Analyzing the prospectus disclosures of US active mutual funds around ESG matters,
we find that only 20% of ESG funds can be classified as impact funds. The remaining are
either ESG-opportunistic funds, or ESG-exclusionary funds. We provide novel evidence of
the prevalence of these fund groups over time, and of their different investment behavior. We
find that only Impact funds or Opportunistic funds adopting ESG-related activism display
greater portfolio-weighted ESG scores, while non-activist Opportunistic funds (the majority)
do not, but tend to short-sell stocks with higher ESG ratings.