Mutual funds and climate news
In the context of rising public awareness of climate change, the proliferation of green mutual funds reflects expectations of their contribution to sustainable economic transition. This paper investigates the effect of climate news on fund flows and on the portfolio allocation decisions of green funds. Using detailed fund- and holdings-level data, we observe that heightening climate news results in significantly larger capital inflows into green funds versus non-green counterparts. Furthermore, we show that, in reaction to climate news, green funds decrease their exposure to high-polluting firms relative to low-polluting firms more than non-green funds do. These results suggest that increasing public awareness boosts capital re-allocation towards green funds and this, in turn, potentially fosters investment relocation towards more environmentally-friendly companies.
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Keywords: Mutual funds, climate news, green finance
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