Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

Samuel M. Hartzmark, Abigail B. Sussman

Series number :

Serial Number: 
565/2018

Date posted :

July 19 2018

Last revised :

July 18 2018
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Keywords

  • Sustainability • 
  • Behavioral Finance • 
  • Fund Flows • 
  • mutual funds • 
  • Salience • 
  • Rank

Examining a shock to the salience of the sustainability of the US mutual fund market, we present causal evidence that investors marketwide value sustainability. Being categorized as low sustainability resulted in net outflows of more than $12 billion while being categorized as high sustainability led to net inflows of more than $24 billion.

Experimental evidence suggests that sustainability is viewed as positively predicting future performance, but we do not find evidence that high sustainability funds outperform low sustainability funds. The evidence is consistent with positive affect influencing expectations of sustainable fund performance and non-pecuniary motives influencing investment decisions.
 

Authors

Real name:
Abigail B. Sussman
Professor
Real name:
Samuel M. Hartzmark
University of Chicago Booth School of Business