2024RF-低碳共同基金(英)

ReviewofFinance,2024,45–74

/10.1093/rof/rfad015

AdvanceAccessPublicationDate:4April2023

LowCarbonMutualFunds*

MarcoCeccarelli1,StefanoRamelli2,andAlexanderF.Wagner3

1MaastrichtUniversity,TheNetherlands,2UniversityofSt.GallenandSwissFinanceInstitute,Switzerlandand3UniversityofZurich,CEPR,ECGI,andSwissFinanceInstitute,Switzerland

Abstract

Climatechangeposesnewchallengesforportfoliomanagement.Inournot-yet-lowcarbonworld,investorsfaceatrade-offbetweenminimizingtheirexposuretoclimaterisksandmaximizingthebenefitsofportfoliodiversification.Thisarticleinvestigateshowinvestorsandfinancialintermediariesnavigatethistrade-off.AfterthereleaseofMorningstar’snovelcarbonriskmetricsinApril2018,mutualfundslabeledas“lowcarbon”experiencedasignificantincreaseininvestordemand,es-peciallythosewithhighrisk-adjustedreturns.Fundmanagersactivelyreducedtheirexposuretofirmswithhighcarbonriskscores,especiallystockswithreturnsthatcorrelatedmorewiththefunds’portfoliosandwerethuslessusefulfordiversifica-tion.Thesefindingsshedlightonwhetherandhowclimate-relatedinformationcanre-orientcapitalflowsinalowcarbondirection.

Keywords:Behavioralfinance,Portfoliomanagement,Climatechange,Investorpreferences,Mutualfunds,Sustainablefinance

JELclassification:D03,G02,G12,G23

ReceivedJune3,2021;acceptedMarch5,2023byEditorMarcinKacperczyk.

*WethankseminarparticipantsatMaastrichtUniversity,EuropeanCommission’sJointResearchCenter,QueenMaryUniversity,UniversityofZurich,UniversityofLiechtenstein,UniversityofSt.Gallen,CorporateFinanceWebinar,UniversityofMannheim,the2019CEPREuropeanSummerSymposiuminFinancialMarkets(eveningsession),the2019GRASFIconference,the2019HelsinkiFinanceSummit,the2019PRIacademicconference,the2020UZHSustainableFinanceconference,the2020WesternFinanceAssociationconference,andtheESSEC-AmundiGreenFinancewebinarforusefulcomments.WearealsogratefultoMarcinKacperczyk(editor),twoanonymousco-editors,ananonymousreferee,MarieBrie`re,MiguelFerreira,StefanoGiglio,SamuelHartzmark,AugustinLandier,StevenOngena,MelissaPrado,BertScholtens,PaulSmeets,LucianTaylor,MichaelViehs,andStefanZeisbergerforusefulsuggestions.WethankHortenseBioyandSaraSilanoatMorningstarforhelpfulclarifications.A.F.W.thankstheUniversityofZurichResearchPriorityProgram“Financialmarketregulation”forfinancialsupport.Theauthorsdeclarethattheyhavenorelevantormaterialfinancialintereststhatrelatetotheresearchdescribedinthisarticle.

VCTheAuthor(s)2023.PublishedbyOxfordUniversityPressonbehalfoftheEuropeanFinanceAssociation.

ThisisanOpenAccessarticledistributedunderthetermsoftheCreativeCommonsAttributionLicense(/licenses/by/4.0/),whichpermitsunrestrictedreuse,distribution,andreproductioninanymedium,providedtheorigin-alworkisproperlycited.

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46 M.Ceccarellietal.

1.Introduction

Howshouldinvestorsbehaveinthefaceofclimate-relatedrisksandtheenergytransitiontoalowcarbonworld?Toanswerthisquestion,itisimportanttorecognizethataccount-ingforclimaterisksininvestmentdecisionsbringsinvestorsbothbenefitsandcosts.

Ontheonehand,shunningcarbon-intensive,“brown”assetscanreduceaninvestor’sexposuretoclimaterisks.Theseriskshaveyettofullymaterialize,bothintermsofphysicalconsequencesandsocietalreactions,andmanyobserversbelievethattheyarecurrentlyunderestimatedinassetprices(

StroebelandWurgler,2021

).Ontheotherhand,inournot-yet-lowcarboneconomy,excluding“brown”assetsandinvestingonlyinthoseconsidered“green”requireinvestorstoforegoopportunitiestodiversify.Thistrade-offisparticularlysalientinassetmanagement,whereportfoliodiversification,notonlythefeaturesofindi-vidualsecurities,playsacrucialroleinreducingoverallinvestmentrisk(

Markowitz,

1952

).

Inthisarticle,westudyhowinvestorsandassetmanagersnavigatethistrade-off.Wefocusonthemutualfundindustry,whichrepresentsanimportantshareofglobalfinancialmarkets,1andexploitaquasi-naturalexperimentinvolvingasuddenincreaseinboththeavailabilityandsalienceofinformationoncarbonrisk(climatetransitionrisk),thatis,theclassofriskderivingfromthetransitiontoalowercarboneconomy.AswedescribeinmoredetailinSection2,onApril30,2018,Morningstar,themostimportantdataproviderinthemutualfundindustry,releasedanewPortfolioCarbonRiskScorederivedfromfirm-leveldataprovidedbySustainalytics,whichMorningstarhascontrolledsince2017.ThenoveltyofMorningstar’sPortfolioCarbonRiskScoreishighlightedbythefactthatitcor-relatesonlymildlywithotherportfoliometrics,basedonpreviouslyavailableenvironmen-talscoresfromSustainalytics,Refinitiv,andMSCIKLD.Basedonitsnewcarbonriskscore,combinedwithrelativelystandardinformationonfirms’fossilfuelinvolvement(FFI),Morningstaralsoissuedaneco-labelformutualfunds—thelowcarbondesignation(LCD).WeusealargesampleofactiveEuropeanandUSmutualfundstostudyinvestors’andfundmanagers’reactionstotheseinformationshocksproducedbythepublicationofMorningstar’sPortfolioCarbonRiskScoreanditsassociatedLCDeco-label.

WedeveloptheconceptualframeworkguidingourempiricalanalysesinSection3.Wefirstconfirmthat,inlinewithextantliterature(e.g.,

Engleetal.,2020

;

Boltonand

Kacperczyk,2021a

),individuallowcarbonsecuritiesarelessriskythanotherfirms,bothintermsofexposuretonegativeclimatechangenewsandrealizedreturnvolatility.Wethenshiftourfocustotheportfoliolevel.Onemaynaivelythinkthattheriskpropertiesoflowcarbonfundsshouldmirrorthoseoftheirlowcarbonholdings.Such,wefind,isnotthecase.Theinvestmentriskofaportfoliodependsnotonlyonthevarianceofitsindivid-ualholdings’returns,butalsoonthecovarianceofthesereturns(

Markowitz,1952

).Empirically,whilelowcarbonfundshavelowerexposuretoclimaterisks,theirvolatilityisnotlowerthanthatofmoreconventionalfunds.Infact,wefindthatthemutualfundswiththelowestcarbonriskscoreshavehighervolatilitythanthosewithmedianscores.Thesourceofthisresultisthehighdegreeofindustryconcentration(

Kacperczyk,Sialm,and

Zheng,2005

)oflowcarbonfunds.ThesefundsoverweightIT,retail,andhealthcarefirms,

In2020,open-endmutualfundshadsomeUSD63trillioninassetsundermanagementworldwide,representingaround26%ofequityanddebtsecuritiesoutstanding(

InvestmentCompanyInstitute,

2021

).

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47

whiletheyunderweightenergy,materials,andutilityfirms.Beyondtheindustryconcentra-tion,thefactthatlowcarbonfundsholdfewerstocksdoesnotsignificantlyfurtherexplaintheirsurprisinglyhighvolatility.Overall,lowcarbonfundsholdassetsthat,althoughindi-viduallylessrisky,haveahighdegreeofcovariance,limitingrisk-sharing.

InSection4,westudythereactionsofmutualfundinvestorstotheApril2018informa-tionshock.Fundsreceivingthe“LowCarbonDesignation”enjoyedasubstantialincreaseintheirmonthlyflowsrelativetootherfunds.TheeconomicimpactoftheLCDlabelcorre-spondstoanaverageincreaseinflowsofapproximately36basispointseachmonththroughtheendof2018;thisincreaseisequaltoabouttwo-thirdsoftheeffectonflowscausedbyaone-standard-deviationstrongermonthlyfinancialperformance.

Beforethenewdatabecameavailable,investorslikelyusedMorningstar’ssustainabilityGlobesasanimperfectproxyforexposuretocarbonrisk.Intuitively,ifafundwithfewGlobesreceivedtheLCD,itwouldcomeasalargersurprisetoinvestors.Consistentwiththislogic,wefindlargereffectsonflowsinsuchsituations.Inaddition,LCD-labeledfundswithstrongrisk-adjustedperformanceexperiencedamorepronouncedflowpremium.Moreover,afterthepublicationoftheLCDlist—butnotbefore—qualifyingforthelowcarboneco-labelresultedinparticularlylargeextraflowsinmonthsofgreaterattentiontoclimatechange,asmeasuredbyGooglesearchintensity.Alltheseresultsareconsistentwithinvestorstakingboththebenefitsandthecostsintoaccountwheninvestinginlowcar-bonfunds.

InSection5,weemployadatasetofmonthlyportfolioholdingstostudythereactionsoffundmanagerstothereleaseofMorningstar’sportfolioandfirm-levelcarbonriskinfor-mation.Weshowthat,afterApril2018,fundmanagersactivelyrebalancedtheirportfoliostoreducetheircarbonrisk.Onaverage,relativetotheperiodbeforethepublicationofMorningstar’scarbonriskmetrics,mutualfundsreducedtheirpositionintheaveragehighcarbonriskfirmbyabout0.17basispointsoftheirassetsundermanagement(AUM)permonth.Thiseffectiseconomicallymeaningful,consideringthatthemedianmonthlypos-itionchangeiszeroforthewholesampleand2.8basispointsfornon-zeropositionchanges.

Managersreactedtocarbonrisknotonlywithaone-shotrebalancingoftheirport-folios,butalsobyintegratingthenewinformationintotheirflow-driveninvestmentdeci-sionsaftertheinitialshock.Inparticular,weobservethatfundsexperiencinglargenegativenetflowssoldhighcarbonriskassetsmoreaggressivelythandidotherfunds,whilefundsexperiencinghighinflowsincreasedtheirstakesinlowcarbonriskassets.

Furthercross-sectionalevidenceindicatesthat,asweexpected,fundswithhigherexanteindustryconcentrationreactedmorestronglytothereleaseofthenewcarbonriskin-formation.Forthesefunds,shiftingtolowercarbonriskassetsislesslikelytodecrease(andmayevenincrease)theirdiversification.Theyarealsolikelytoserveclientswhoarelessinterestedinbroaddiversificationinthefirstplace.Importantly,wefindthatwhenmanagersreducedtheirpositionsinstockswithascoreofmediumorhighcarbonrisk,theydidsomoreaggressivelyforthosewithahigherreturncovariancewiththeremainderoftheportfolio,consistentwithanattempttopreservediversification.

Thisarticlecontributes,first,byprovidinginsightsintothebenefitsandcostsofgreeninvestmentproducts.Existingresearchsuggeststhatfirmswithbetterenviron-mentalperformancehavelowerexposuretoclimate-relatedrisks,andarepricedac-cordingly(e.g.,

Engleetal.,2020

;

BoltonandKacperczyk,2021a

,

2021b

;

Huynhand

Xia,2021

;

Ilhan,Sautner,andVilkov,2021

;

Ramellietal.,2021b

;

Hsu,Li,andTsou,

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48 M.Ceccarellietal.

2022

).However,howtheriskpropertiesofindividualgreensecuritiestranslatetotheportfoliolevelisstilllargelyunexploredand,asweshow,notobvious.Thetrade-offattheportfoliolevelthatwehighlightinthiscontextisconsistentwiththetheoreticallit-eratureongreeninvesting.2

Second,wecomplementtheliteratureonwhetherandwhyinvestorsprefersociallyre-sponsibleinvestmentproducts(e.g.,

Bollen,2007

;

Renneboog,terHorst,andZhang,2011

;

RiedlandSmeets,2017

;

Bassenetal.,2019

;

HartzmarkandSussman,2019

;

Barber,

Morse,andYasuda,2021

;

Bauer,Ruof,andSmeets,2021

;

Geczy,Stambaugh,andLevin,

2021

;

AndersonandRobinson,2022

).Theresponsestothequasi-naturalexperimentthatweanalyzehighlightboththecostsandbenefitsofsociallyresponsibleinvestmentproducts,crucialforunderstandingthecomplexityofinvestorbehavioronsustainabilityissues.Intermsofcosts,lowcarboninvestingasksinvestorstopayapriceintermsoflowersectoraldiversification,atleastintheshortterm.Genericsustainableratings/products,incontrast,areusuallybasedon“bestinclass”approachespreciselytoallowinvestorstonotgiveupanysectoraldiversification.Intermsofbenefits,theeventweanalyzeallowsafocusoninvestors’specificclimate-relatedpreferences.Asdocumentedby

HartzmarkandSussman

(2019)

,theinvestorswestudyhadalreadyself-selectedintofundsbasedontheirgenericsustainabilitypreferences.Ourresultsindicatethatboththecostandbenefitsidesoflowcarboninvestingshapeinvestorresponses.

Third,wecomplementtheliteratureonprofessionalmoneymanagerbehavior.Severalstudiesconsiderfundmanagerbehaviorasafunctionoftraditionalfinancialperformancemetrics,butinrecentyears,ESGfactors,andclimate-relatedconsiderationsinparticular,havegainedimportanceintheindustry.Forinstance,

Krueger,Sautner,andStarks(2020)

and

Ilhanetal.(2023)

providesurveyevidenceontheimportanceofclimaterisksforinsti-tutionalinvestors.

BoltonandKacperczyk(2021a

)showthatinstitutionalinvestorsapplycarbon-relatedscreensand

Choi,Gao,andJiang(2023)

documentadecreaseininstitution-alinvestors’exposuretocarbon-intensivedomesticfirmsafter2015.Fundmanagerschangetheirholdingsaftershiftsinclimateriskperceptionduetonaturaldisasters(

Alok,

Kumar,andWermers,2020

)orextremeheatevents(

Alekseevetal.,2021

).

Gantchev,

Giannetti,andLi(2022)

studyfundmanagers’tradingbehaviorwithrespecttofirms’sus-tainability,focusingonthepricepressureimplicationsonindividualstocks.Ourarticlecontributestothisliteraturebystudyinghowfundmanagersactivelychangedtheirport-folioholdingsfollowingincreasedtransparencyonclimaterisksinthemutualfundindustry.

In

Heinkel,Kraus,andZechner(2001)

and

Pa´stor,Stambaugh,andTaylor(2020b

),forinstance,di-vestmentfrom“brown”assetsisnegativelyrelatedtoinvestorriskaversion,becausedeviatingfromthemarketportfolioimpliesincurringdiversificationrisks.Similarly,

Boyleetal.(2012)

exploretheeffectsonoptimalportfoliosoftheneedtobalanceassetdiversification(“Markowitz’sview”)andassetfamiliarity(“Keynes’view”).

Wagner(2011)

developsamodelinwhichinvestorsforgodi-versificationbenefitstohedgeliquidationrisks.

Pedersen,Fitzgibbons,andPomorski(2021)

analyzeoptimalportfolioswhenconsideringenvironmental,social,andgovernance(ESG)risksandprefer-ences.Incontemporaneouswork,

Hambel,Kraft,andvanderPloeg(2022)

theoreticallyexploretheinterplaybetweengovernmentalclimateactionsandportfoliodiversificationfromamacro-financeperspective.Ofcourse,lowcarboninvestingcancomeindifferentshapes.Forinstance,

Andersson,Bolton,andSamama(2016)

and

Bolton,Kacperczyk,andSamama(2022)

outlineapproachestoreducingCRwithsmalltrackingerrorsandsector-weighteddeviations.

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LowCarbonMutualFunds

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2EmpiricalSettingandData

2.1EmpiricalSetting

OnApril30,2018,MorningstarlaunchedonitsplatformthePortfolioCarbonRiskScore,ameasuredesignedtohelpitsclientsbetterassessaportfolio’sexposuretocarbonrisk(alsoknownasclimatetransitionrisk),thatis,theriskduetothetransitionfromafossilfuelrelianteconomytoalowercarboneconomy.3Onthesameday,MorningstarassigneditsLCDlabeltofundswithlowcarbonriskscoresandlowlevelsoffossilfuelexposure;thisheuristicisaimedathelpingclientseasilyidentifymutualfundswhoseportfoliosalignwiththetransitiontoalowcarboneconomy.4

Figure1

showstheportfoliocarbonriskscoreandtheLCDlabel,asseenonMorningstar’sfundreport.Detailsonthemethodologyunderlyingthesemetricsarein

Morningstar(2018a

,

2018b

).

Theportfoliocarbonmetricsarebasedonfirm-levelcarbonriskscoresfromtheESGdataproviderSustainalytics;thesescoreswerealsodisclosedforthefirsttimeattheendofApril2018.5Thesimultaneousreleaseoffirm-levelandfund-levelcarbonriskscoreswaspossiblebecauseMorningstarhascontrolledSustainalyticssince2017(initiallywitha40%stake,whichincreasedto100%in2020).Accordingtothetwodataproviders,thefirm-levelcarbonriskscorequantifiesacompany’sexposureto,andmanagementof,materialclimatetransitionrisk.Itattemptstocapturethedegreetowhichafirm’seconomicvalueisatriskinthetransitiontoalowcarboneconomy(

Morningstar,2018b

).TableA1intheSupplementaryAppendixprovidesthesummarystatisticsoffirm-levelcarbonriskscoresineachGlobalIndustryClassificationStandard(GICS)sector.Firmsinhigh-emittingsectors(e.g.,energy,materials,andutilities)havethehighestmeancarbonriskscores,butthereissubstantialvariabilityinthismeasurewithinallsectors.

ToreceivetheLCDlabel,afundhastocomplywithtwocriteria:(i)a12-monthaveragePortfolioCarbonRiskScorebelow10(outof100)and(ii)a12-monthaverageFFIratingbelow7%.AsofApril2018,havingaPortfolioCarbonRiskScorebelow10impliesbeingamongthe29%best-performingfundsonthisdimension.A12-monthportfolioFFIratingbelow7%representsa33%under-weightingoffossilfuel-relatedcompanies,relativetotheglobalequityuniverse.6

ThereleaseofMorningstar’scarbonmetricsthusrepresentedadoubleshocktoinvest-ors:ashocktotheavailabilityofcarbon-relatedinformationthroughthefirm-levelandfund-levelcarbonriskscoresandashocktoitssaliencethroughtheLCDlabel.Thearrival

Morningstar’scarbonriskmetricsdonotreflectaportfolio’sexposuretoextremeweathereventscausedbyclimatechange,althoughthesearelikelytoimpactfirms’assetsandoperationsandhencecauseinvestorssignificantlosses.Foranoverviewofthedifferencesbetweencarbonriskandphysicalrisk,see,forinstance,

TaskForceonClimate-RelatedFinancialDisclosures(2017)

.

SeeMorningstar,“Morningstarlaunchesportfoliocarbonriskscoretohelpinvestorsevaluatefunds’carbon-riskexposure,”May1,2018.

TocomputeitsPortfolioCarbonRiskScores,Morningstarweightsthefirm-levelcarbonriskscoresbythetotalinvestment(debtandequity)thatafundholdsinagivencompanyattheendofthequarter.APortfolioCarbonRiskScoreiscalculatedifmorethan67%ofthefund’sportfolioassetshaveafirm-levelcarbonriskscore.

Sustainalytics/Morningstarclassifyafirmasfossilfuelinvolvedifitderivesatleast5%ofitsrev-enuefromthermalcoalextraction,thermalcoalpowergeneration,oroilandgasproductionorpowergeneration,oratleast50%ofitsrevenuesfromoilandgasproductsandservices(

Morningstar,2018b

).

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50 M.Ceccarellietal.

Figure1.Morningstardirectsnapshot.

ofthesenewdataispotentiallyrelevantbothtofundmanagersandtotheirclients.7Morningstarrepresentativeshaveconfirmedtousthattheydidnotcommunicatethere-leaseofthesemetricstoeitherfundmanagersorclientsinadvanceoftheirpublicationonApril30,2018.Asseenfurtherbelow,ouranalysesofpre-publicationtrendsofinvestorandfundmanagerbehaviorareindeedconsistentwiththereleaseofthenewdatanotbeinganticipated.

2.2Data

Webaseouranalysesontwomaindatasets,coveringtheperiodfromApril2017(1yearbeforeourmaineventofinterest)toSeptember2019:Fund-levelmonth-endinformation(fromMorningstarDirect)andindividualhistoricalportfolioholdings(fromMorningstarOnDemand).Wecomplementthesetwodatasetswithfirm-levelcharacteristicsfromCompustatCapitalIQandSustainalytics.Inwhatfollows,webrieflydescribeourdata.

2.2.a.Fund-levelcharacteristics

FromMorningstarDirect,weobtainsurvivorship-bias-freedata(allinUSD)forallactiveopen-endmutualfundsdomiciledinEuropeandtheUSA.Toworkwitharelativelyhomo-geneoussample,wedropfundsclassifiedbyMorningstaraspurefixedincome,sector-specific,orinvestingexclusivelyoutsidetheUSAandEurope.Weareleftwithtwentycategoriesofequityandbalancedfunds.8

Morningstar(2018a

)suggeststhat“Understandingportfoliocarbonriskgivesinvestorstheabilitytomakestrategicdecisionstomitigatecarbonriskandabasisformeasuringcarbonriskreduc-tion.Thisappliestoassetmanagersaswellasassetownersandfundinvestors.Anassetmanagercanusecarbonriskinformationtoinformbuy–sellandportfolioconstructiondecisions,tomakedecisionsonwhichcompaniestoengagewithtobetterunderstandtheirclimateriskmitigationstrategiesandtocommunicatewithclientsandotherstakeholdersabouttheiractivities.Anassetownerorfundinvestorcanusecarbonriskinformationtobetterunderstandhowclimaterisksaf-fecttheirinvestmentsoverallandasabasisforactiontoreducetheirexposuretoclimaterisks.Thisinformationallowsfundinvestorstotakeclimaterisksintoconsiderationastheymonitor,com-pare,andselectfundsandassetmanagers.”

Thetwentycategoriesinoursampleare:aggressiveallocation,allocationmiscellaneous,cautiousallocation,equitymiscellaneous,Europeemergingmarketsequity,Europeequitylargecap,flexibleallocation,globalequitylargecap,globalequitymid/smallcap,long/shortequity,moderatealloca-tion,targetdate,UKequitylargecap,UKequitymid/smallcap,USequitylargecapblend,USequitylargecapgrowth,USequitylargecapvalue,USequitymidcap,USequitysmallcap,andEuropeequitymid/smallcap.OurresultsalsoholdwhenusingthefullsampleoffundsdomiciledinEuropeandtheUSA,orwhenjustfocusingonpureequityfunds.

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Whilemutualfundsissueseveralshareclassestotarget-specificinvestorgroupsorgeog-raphies,theunderlyingportfolioisthesameregardlessofclass.Consequently,weconductourmainanalysesatthefundlevel.Inaggregatingdatafromtheshareclasstothefundlevel,wecomputefunds’returnsandvolatilityasvalue-weightedaveragevaluesacrossdif-ferentshareclasses.Fundassets(inUSD)arethesumofafund’sAUMinallitsshareclasses.Werequirefundstohaveatleast1millionUSDinAUMandtobeatleast1yearold.Weretrieveotherfund-levelinformationfromeachfund’slargestshareclass.

Following

SirriandTufano(1998)

,wecomputeflowsasthemonthlygrowthofAUM,netofreinvestedreturns.Wewinsorizeflowsatthe1stand99thpercentiles.Following

HartzmarkandSussman(2019)

,wealsocomputeameasureofnormalizedflows:First,wesplitthesampleintodecilesoffundsize;second,werankfundsaccordingtonetflowswith-ineachsizedecileandcomputepercentilesofthenetflowrankings.Thesepercentilescor-respondtothenormalizedflowvariable.

Returnisthetotalmonthlyreturn(inpercentagepoints),asreportedbyMorningstar.Weestimatethereturnvolatilityasthestandarddeviationofreturnsoverthepast12months.Wealsocollectotherinformationabouteachfund,includingitsage,itsMorningstarcategory,itsfinancialperformancerating(theMorningstarStars,ona1–5scale,with5indicatingatopfinancialperformer),anditsgenericsustainabilityrating(theMorningstarGlobes,ona1–5scale,with5indicatingatopsustainabilityperformer).

Toaccountfortheimpactonflowsofchangesinafund’sfinancialperformancerating(

DelGuercioandTkac,2008

),wedefinethevariableDStarstoindicateanupgrade(1)oradowngrade(–1)inthefund’sStarsratingfromthepreviousmonth.Similarly,toaccountfortheimpactonflowsofchangesinafund’sgenericsustainabilityrating(

Ammannetal.,

2018

;

HartzmarkandSussman,2019

),wedefinethevariableDGlobestoindicateanup-grade(1)oradowngrade(–1)inthefund’sGlobesratingfromthepreviousmonth.WeclassifyobservationswithmissingStarsorGlobesasnochange.

PanelAof

TableI

showssummarystatisticsforfund-monthobservations,fromApril2017toSeptember2019,forwhichinformationonflowsisavailable.PanelBprovidesasnapshotofthestatisticsasoftheendofApril2018.Thesamplecoverssome13,600funds,ofwhich17–18%obtainedMorningstar’sLCDeco-label.

PanelAinTableA2intheSupplementaryAppendixshowsthegeographicaldistribu-tionofoursampleasofApril2018.Around9,000fundsaredomiciledinEuropeand4,000intheUSA,ofwhich18%receivedtheinitialLCD.PanelsBandCinthesametableshowtheshareoflowcarbonfundsfordifferentvaluesofMorningstar’sgenericsustain-abilityratings(Globes)andoverallfinancialperformanceratings(Stars).HighglobesandhighstarsfundsaremorelikelytoreceivetheLCD.However,evenamongfundswithoneortwoglobes,oroneortwoStars,asignificantfractionobtainedthelowcarboneco-label.

TableA3intheSupplementaryAppendixexploresthecorrelationsofthenewdatawithpreviouslyavailablefirm-levelenvironmentalscores.ItshowsthatthePortfolioCarbonRiskScoreonlymildlycorrelateswithmetricsinvestorsmayhaveself-computed,basedonexistinginformation(wecalculatedthesemeasuresbasedonportfolioholdingsasofApril2018).Inparticular,thePortfolioCarbonRiskScorehasacorrelationof–0.27withaport-folio’sSustainalytics’environmentalscore,–0.08withaportfolio’sRefinitiv’senvironmen-talscore,and–0.19withaportfolio’sMSCI–KLD’senvironmentalscore.Overall,thelowcorrelationofthePortfolioCarbonRiskScorewithpriorenvironmentalmetricsconfirmstherelevanceoftheApril2018informationshocks.

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52 M.Ceccarellietal.