SUSTAINABILITY OR PERFORMANCE? RATINGS AND FUND MANAGERS' INCENTIVES

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• Nickolay Gantchev, Professor of Finance, Warwick Business School, University of Warwick
• Tuesday 29 November 2022, 13:00-14:15
• Castle Teaching Room (Cambridge Judge Business School).

If you have a question about this talk, please contact Emily Brown.

We explore how mutual fund managers and investors react when the tradeoff between 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.

This talk is part of the Finance Seminars, CJBS series.

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• Castle Teaching Room (Cambridge Judge Business School)
• Finance Seminars, CJBS

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