Work

Green Window Dressing

Year: 2025

Type: article

Abstract: ABSTRACT This paper establishes that mutual funds strategically time their trades in environmental, social, and governance (ESG) stocks around disclosure dates to inflate their sustainability ratings. This claim is supported by three empirical findings. First, we show that funds' ESG betas increase shortly before disclosure and decrease shortly afterwards. Second, we document that post‐disclosure fund returns are higher but have lower ESG exposure than disclosed portfolios. Third, we provide evidence that ESG stock prices temporarily rise before disclosure and decline afterwards. Overall, we establish that green window dressing positively impacts fund sustainability ratings, performance, and flows.

Source: The Journal of Finance

DOI: 10.1111/jofi.13499

Authors: GIANPAOLO PARISE, MIRCO RUBIN

Institutions: Center for Economic and Policy Research, Tilburg University, Centre for Economic Policy Research

Language: English

Topic: Sustainable Finance and Green Bonds

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,430

OpenAlex ID: W4414629200

FWCI: 20.56

Cites: 57

Cited by: 24

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