Do Mutual Funds Respond to Mechanical Changes in ESG Ratings?
利用准实验设计，研究共同基金投资者是否对ESG评级的纯机械变化（与企业实际ESG活动无关）做出反应，发现机械评级上升会增加被ESG基金选中的概率，但已持仓则不变，且主动基金也难以过滤这种变化。
Using a quasi-experimental setting, we study whether mutual fund investors respond to a purely mechanical change in environmental, social, and governance (ESG) ratings—that is, a change independent of concurrent changes in firms’ actual ESG activities. We find that when a firm experiences a mechanical increase in ESG ratings, the probability of being selected by an ESG fund increases (extensive margin). In contrast, if the firm is already in the fund’s portfolio, its holdings do not change (intensive margin), consistent with portfolio weighting being based on market capitalization. The selection effect is observable not only among funds that follow an ESG index but also among active ESG funds, which presumably should have the resources and ability to identify and filter out the mechanical increase in ESG ratings. Among active ESG funds, the selection effect is stronger for funds with less assets under management, larger portfolios of firms, and lower expense ratios, consistent with the notion that resource constraints may impede a fund’s screening ability. Our findings imply that passive investing based on commercial ESG ratings—whether due to resource constraints or portfolio indexing—might result in portfolio allocations that do not reflect the actual ESG activities of firms. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.06184 .