CEF.UP – FIN Seminar/Webinar

Thursday – April 13^th, 2023 at 1:00 p.m. |Room 305| Online

“Sustainability or Performance: Ratings and Fund Managers’ Incentives”

 Nickolay Gantchev  – Warwick Business School  (joint work with Mariassunta Giannetti and Rachel Li)

Abstract:

“We explore how mutual fund managers and investors react when the tradeoff between a fund’s sustainability and performance becomes salient. Following the introduction of Morningstar’s sustainability ratings (the “globe” ratings), mutual funds increased their holdings of sustainable stocks to attract flows. Such sustainability-driven trades, however, underperformed, impairing the funds’ overall performance. Consequently, a tradeoff between sustainability and performance emerged. In the new equilibrium, the globe ratings do not affect investor flows and funds no longer trade to improve their globe ratings.”