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Abstract:
Analyzing US active equity mutual fund prospectuses, we find that only 20% of those using ESG terminology qualify as impact funds, tilting their portfolios based on non-pecuniary ESG considerations. The remainder are either exclusionary funds, using ESG criteria to restrict their investment universe, or opportunistic funds, leveraging ESG data for financial gain. Our findings indicate that only impact funds, and those engaging in ESG activism, exhibit higher ESG ratings. In contrast, most opportunistic funds display no clear ESG preference and may even short-sell high ESG-rated stocks. Overall, funds tend to adhere to their ESG claims, attenuating concerns about widespread greenwashing.
