Nomen est omen–the effects of ‘greening’ European fund names

Abstract

Investors rely on a fund's name as an indicator of its investment strategy. With the continuing popularity of sustainability in finance, an increasing number of funds are incorporating ESG-related terms into their names. In this study, we identify 140 funds that were rebranded by investment companies to align with sustainability principles. Using propensity score matching, we construct a comparable control group and apply panel regression techniques to analyze ESG-related performance indicators, raw returns, and fund flows. Our findings indicate that renamed funds did not achieve higher LSEG ESG-Scores. However, they successfully reduced their (Formula presented.) -exposure and delivered returns comparable to those of their conventional counterparts. Furthermore, investment companies experienced a significant increase in fund flows following the renaming of their funds.