Authors:

  • Philippe van der Beck

Abstract

2023. Working Paper. "I show that the recent returns to ESG investing are strongly driven by price impact from flows towards ESG funds. Using data on institutional trades, I estimate the market’s ability to accommodate the demand of ESG funds, which is given by the elasticity of substitution between ESG and other stocks. I show that every dollar flowing towards ESG stocks increases their aggregate market value by $0.7. Using a novel measure of total ESG flows, I estimate an annual flow-driven ESG return of 2.07%. In the absence of flows, ESG funds would have not outperformed the market from 2017 to 2022."