This paper develops and tests an equilibrium model of active fund management with ESG considerations. Heterogeneous sustainability preferences lead fund managers to intensify information acquisition on assets across the ESG spectrum, broadening the scope of active management. This information channel enhances price informativeness, lowers discount rates, and increases portfolio deviation from benchmarks. The model predicts a negative and concave ESG-expected return relation, stronger for green assets and weaker for brown assets. Using data on U.S. mutual funds and stocks from 2007–2021, we find supporting evidence based on price informativeness and the implied cost of equity capital.

Avramov, D., Cheng, S., Tarelli, A., Active fund management when ESG matters, <<JOURNAL OF BANKING & FINANCE>>, 2026; 182 (January 2026): N/A-N/A. [doi:10.1016/j.jbankfin.2025.107597] [https://hdl.handle.net/10807/326155]

Active fund management when ESG matters

Tarelli, Andrea
Ultimo
2026

Abstract

This paper develops and tests an equilibrium model of active fund management with ESG considerations. Heterogeneous sustainability preferences lead fund managers to intensify information acquisition on assets across the ESG spectrum, broadening the scope of active management. This information channel enhances price informativeness, lowers discount rates, and increases portfolio deviation from benchmarks. The model predicts a negative and concave ESG-expected return relation, stronger for green assets and weaker for brown assets. Using data on U.S. mutual funds and stocks from 2007–2021, we find supporting evidence based on price informativeness and the implied cost of equity capital.
2026
Inglese
Avramov, D., Cheng, S., Tarelli, A., Active fund management when ESG matters, <<JOURNAL OF BANKING & FINANCE>>, 2026; 182 (January 2026): N/A-N/A. [doi:10.1016/j.jbankfin.2025.107597] [https://hdl.handle.net/10807/326155]
File in questo prodotto:
File Dimensione Formato  
AvramovChengTarelli2026_withAppendix.pdf

accesso aperto

Tipologia file ?: Versione Editoriale (PDF)
Licenza: Creative commons
Dimensione 2.68 MB
Formato Adobe PDF
2.68 MB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/326155
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact