The backfire of mutual funds balancing financial objectives in ESG investments: Evidence from China

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2024-11-01 DOI:10.1016/j.irfa.2024.103686

Qiling Luo , Minggao Xue , Yeqin Xiong , Xiaowen Ge

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Abstract

In response to ESG (Environment, Social, and Governance) shock, mutual funds seem to be moving toward balancing the ESG objectives with traditional financial objectives. We observe such efforts in a sample of the Chinese active mutual funds from 2016 to 2022. These funds fulfill the Principles for Responsible Investment (PRI) requirements by investing in assets that combine superior ESG performance with excellent returns. However, the balance strategy falls short of its intended goals compared to normal ESG investments but rather leads to additional underperformance. Although our work reveals potential opportunities for balancing ESG and financial objectives, the lack of learning process and the limited attention make mutual funds miss such opportunities when they switch to balance strategy to speculatively cope with PRI constraints. This outcome suggests that in the face of the new investment trends driven by ESG shock, funds would pay a price for a superficial understanding of balance strategy and hasty actions.

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共同基金在 ESG 投资中平衡财务目标的反作用：来自中国的证据

为了应对ESG（环境、社会和治理）的冲击，共同基金似乎正朝着平衡ESG目标和传统财务目标的方向发展。我们从 2016 年至 2022 年的中国主动型共同基金样本中观察到了这种努力。这些基金通过投资于兼具卓越的环境、社会和公司治理绩效与丰厚回报的资产，满足了责任投资原则（PRI）的要求。然而，与普通的环境、社会和公司治理投资相比，平衡策略并未达到预期目标，反而导致了额外的业绩不佳。尽管我们的研究揭示了平衡 ESG 和财务目标的潜在机会，但由于缺乏学习过程和关注度有限，共同基金在转而采用平衡策略投机性地应对 PRI 限制时错失了这些机会。这一结果表明，面对由环境、社会和公司治理冲击驱动的新投资趋势，基金将为肤浅地理解平衡战略和草率行动付出代价。

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.