Flow-Driven ESG Returns
Year: 2026
Type: report
Abstract: I show that the recent returns to ESG investing are strongly driven by price impact from flows towards ESG portfolios. Using data on trades, I estimate the market’s ability to accommodate ESG flows, which is given by the elasticity of substitution between ESG and other stocks. I show that every dollar flowing towards a representative ESG portfolio increases the market value of ESG stocks by $0.8. The growing institutional flows into the ESG portfolio are the main driver of ESG returns and have caused an annual flow-driven return of 1.9%. In the absence of flows, ESG stocks would not have outperformed the market from 2012 to 2023.
DOI: 10.37214/jofdata.35
Author: Philippe van der Beck
Institution: École Polytechnique Fédérale de Lausanne
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3209505966