Abstract
I first show that there is a positive correlation between fund strategy based SRI classification and score based SRI classification. I then document that morningstar sustainability rating had a disciplining effect and fund managers started creating their portfolios more in line with their revealed ESG strategy in fund prospectus. Strategy based SRI fund, though, appears to form a consistently significant proportion of funds in bottom deciles of portfolio ESG score. Using this property of the data, I show that heterogeneity in the convexity of flow-performance relationship discussed extensively in literature is observed along the axis of strategy based SRI classification, but not along portfolio ESG score based SRI classification. The results are robust to various measures of return and score-based SRI classifications.
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