ESG Investing and Mutual Fund Manager Behavior
I explore whether managers of Environmental, Social, and Governance (ESG) funds differ in their disclosure behavior as compared with conventional fund managers. Prior studies suggest that investors of ESG funds have long-term investment horizons, thereby encouraging fund managers to be less concerned about their quarterly portfolio disclosure. Using a database of third-party sustainability score of mutual funds, I find that funds that rank high on the score carry out less portfolio window dressing. Further, I provide evidence that ESG fund managers use long-term performance metrics in their investment decisions, aligned with their clients' long-term investment horizons. Moreover, I find that the heterogeneity in disclosure behavior is not due to the endogenous allocation of fund managers to ESG funds.