Greenwashing with Style: The Effect of ESG-Related Fund Name Changes on Fund Flows

This paper examines whether mutual funds engage in greenwashing by changing their names to take advantage of the socially responsible investing styles. We study 2,292 ESG-related fund name changes and their effects on fund inflows and portfolio holdings. Following inclusion of ESG term in their name, mutual funds experience an average cumulative abnormal inflow of 13.87% over the one year period. On average, post-name-change funds’ turnover increases and ESG metrics improve, suggesting that funds deliver on their new label’s promise. Retail investors direct abnormal flows to ESG-rebranded funds irrespective of ESG score improvements, which makes them susceptible to potential greenwashing.