What Does ESG Investing Mean and Does It Matter Yet?

Abstract

We explore three ways to classify mutual funds as ESG-oriented: by their names, their voting records, and their holdings. ESG-named funds and ESG-voting funds tend to be smaller than non ESG funds, and spread their investment over more individual companies. They never control more than a quarter of aggregate assets under management. Even taking a broad view of judging funds by the ESG scores of their holdings only increases this to about 33% of AUM. Voting in favor of costly shareholder E&S proposals is still rare, and the portfolio additions and deletions of ESGoriented funds do not differ much from those of non-ESG funds. We conclude that it is surprisingly difficult to find evidence of any real impact of the talk about ESG-oriented investing, whether in voting or widespread and binding investment filters.