Do ESG Mutual Funds Deliver on Their Promises?

Do ESG Mutual Funds Deliver on Their Promises?

Quinn Curtis, Jill Fisch, Adriana Robertson

Series number :

Serial Number: 

Date posted :

May 17 2021

Last revised :

June 23 2021
SSRN Share


  • mutual funds • 
  • ESG mutual funds • 
  • securities regulation • 
  • empirical legal studies • 
  • Environmental • 
  • Social • 
  • and corporate governance • 
  • ESG • 
  • capital markets • 
  • portfolio composition • 
  • Mutual fund voting • 
  • mutual fund fees • 
  • Disclosure • 
  • ERISA • 
  • fiduciary duty • 
  • Name Rule • 
  • 35d-1

Corporations have received growing criticism for their role in climate change, perpetuating racial and gender inequality, and other pressing social issues.

In response to these concerns, shareholders are increasingly focusing on environmental, social, and corporate governance (ESG) criteria in selecting investments, and asset managers are responding by offering a growing number of ESG mutual funds. The flow of assets into ESG is one of the most dramatic trends in asset management.

But are these funds giving investors what they promise? This question has attracted the attention of regulators, with the Department of Labor and the Securities and Exchange Commission (SEC) both taking steps to rein in ESG funds. The change in administration has created an opportunity to rethink these steps, but the rapid growth and evolution of the market means regulators are acting without a clear picture of ESG investing.

We fill this gap by offering the most complete empirical overview of ESG mutual funds to date. Combining comprehensive data on mutual funds with proprietary data from the several of the most significant ESG ratings firms, we provide a unique picture of the current ESG environment with an eye to informing regulatory policy. We evaluate a number of criticisms of ESG funds made by academics and policymakers and find them lacking. We find that ESG funds offer their investors increased ESG exposure. They also vote their shares differently from non-ESG funds and are more supportive of ESG principles.

Our analysis shows that they do so without increasing costs or reducing returns. We conclude that ESG funds generally offer investors a differentiated and competitive investment product that is consistent with their labeling. In short, we see no reason to single out ESG funds for special regulation.

Published in

Published in: 
Publication Title: 
Michigan Law Review, Forthcoming


Real name:
Quinn Curtis
Real name:
Research Member, Board Member
University of Pennsylvania Law School
Real name:
Adriana Robertson