Green ETFs Attributes and Investor Behaviour
Rim Laksaci  1@  
1 : Université Catholique de Louvain

In this paper, we compare the dynamics of investor cash flows in conventional and green equity exchange-traded funds (ETFs). Using a unique dataset covering 1053 US passive ETFs during 2018--2023, we alternatively investigate the flow-performance relationship, including financial and environmental performance. We empirically show that cash flows are sensitive to lagged returns in conventional ETFs but not in green ones. However, we find that lagged environmental score dynamics have no impact on cash flows in either conventional or green ETFs. Furthermore, our findings exhibit contrasting results for retail and institutional investors. Specifically, we show that cash flows are sensitive to lagged returns in green ETFs held by a majority of only retail investors. Hence, we provide empirical evidence that investors derive utility from green labels rather than from environmental performance. Our results are robust across different performance horizons, controlling for life cycle, size, investor demand for green products and market trends. Our findings have important policy implications for funding the global transition toward a green economy.


Online user: 9 Privacy
Loading...