Abstract
This study investigates whether environmental, social, and governance (ESG) funds have distinct features from conventional funds based on holdings-based ESG scores, flows, and performance. We find that ESG funds have significantly higher ESG scores than conventional funds; ESG funds with higher scores significantly weaken flow-performance sensitivity; and their scores are negatively associated with risk-adjusted future performance. However, there is no evidence to support better selection skills among ESG fund investors than among non-ESG fund investors. By conducting a comprehensive analysis, this study suggests that ESG funds have distinct fund attributes, and thus, “ESG” is not a mere marketing rhetoric in the Korean fund market.
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