Desmarais Global Finance Research Centre (DGFRC) Seminar
George Aragon
Arizona State University
Machine-Learning about ESG Preferences: Evidence from Fund Flow
Date: Friday, March 22, 2024
Time: 10:30-11:45 am
Location: Bronfman Bldg. (1001 Sherbrooke St. West), Room 340
All are cordially invited to attend.
Please dgfc.mgmt [at] mcgill.ca (subject: Desmarais%20Global%20Finance%20Research%20Centre%20Seminars) (contact us) for more details.
Abstract
We construct a broad dataset of Environmental, Social, and Governance (ESG) scores for equity mutual funds based on the stocks they hold and stock-level scores from six prominent ESG data providers. We find that many ESG scores predict fund flows despite substantial disagreement among providers. We then use machine learning to concentrate the information in scores and generate accurate flow forecasts (ESG-driven flows). We use ESG-driven flows to proxy for a fund’s ESG performance and find that better performing funds subsequently realize higher flows and lower returns. Investors also pay $14 million/year more for a top ESG fund.
