How do investors respond and fund managers invest after ESG-renaming?

by Kayshani Gibbon (Utrecht University), Jeroen Derwall (Maastricht University/ECCE, Utrecht University), Dirk Gerritsen (Utrecht University), Kees Koedijk (Utrecht University/ ECCE affiliate)

Using a unique global sample of 740 ESG-related name changes between July 2016 and September 2022, we investigate investors' response and fund managers' behaviour in terms of fund flows, portfolio-level ESG metrics, portfolio turnover, and fees. We provide mixed evidence on whether funds increase flows by renaming, although effects appear significant for funds domiciled in Europe. Fund managers do improve the ESG performance, reduce exposure to controversial businesses, decrease the carbon intensity, and lower the overall ESG risks of their portfolios after ESG renaming. Repurposing has no material impact on funds' turnover rates and on fees. The results alleviate concerns that funds use ESG-oriented name changes cosmetically.