Low-carbon Mutual Funds

Low-carbon Mutual Funds

Marco Ceccarelli, Stefano Ramelli, Alexander Wagner

Series number :

Serial Number: 
659/2020

Date posted :

March 19 2020

Last revised :

February 22 2021
SSRN Share

Keywords

  • Behavioral Finance • 
  • climate change • 
  • eco-labels • 
  • investor preferences • 
  • mutual funds • 
  • Sustainable Finance

Low-carbon mutual funds allow investors to purchase lower exposure to climate change risk at the cost of lower sectoral diversification. On balance, this proposition proves to be appealing for investors, as seen from the effect on fund flows of the introduction of Morningstar’s “Low Carbon Designation”, and of subsequent updates.

Active funds that missed the label at its initial release later shifted their holdings towards less carbon-intensive firms. The competition of intermediaries for investment flows along climate performance can thus have far-reaching consequences for investors.

Authors

Real name:
Marco Ceccarelli
Real name:
Stefano Ramelli