Green fund investors and ESG performance: Evidence from China

Abstract

Using the ESG scores from the Bloomberg Database and the manually filtered green fund investor data, we study the influence of green fund investors on the Chinese A-shares' ESG performance. As we have found, the holding of fund investors who pay attention to sustainable development can improve the firm's ESG performance, and this improvement is more pronounced in state-owned enterprises, heavily polluting industries, and after the green policy announcement. Our findings are robust after considering the reverse causality endogeneity concern and sample selection bias. In addition, the holdings of green fund investors favor the company's status as a green index constituent and its long-term financial performance. Further, the mechanism test reveals the influencing channel of this improvement and supports that it is long-term green fund investors themselves improving the firms' ESG performance and can improve a firm's ESG performance by attracting other long-term investors and new mutual fund investors, and increasing the level of media scrutiny pressure. Our paper contributes to figuring out the impact of institutional holding on ESG development and further points out the source of this influence.