Green Finance Advisor of Friends of the Earth (HK)

The article “ESG Disclosure and Investors’ Attention: Evidence from Mutual Fund Prospectuses” explores the relationship between ESG disclosures in mutual fund prospectuses and their impact on fund flows. The authors focus on distinguishing between specific and generic ESG disclosures and investigate the factors that influence investors’ preferences regarding these disclosures.

To analyze the ESG disclosures, the authors use a unique approach that combines textual analysis and classification tasks. They employ a pre-trained large language model called BART-large to classify sentences in the prospectuses as ESG-related or not. They further categorize the ESG-related sentences as specific or generic. This methodology allows for a more detailed understanding of the specific ESG aspects that significantly affect investor decisions.

The study finds that mutual funds with extensive specific ESG disclosures tend to attract more investor interest. These detailed disclosures are perceived as more credible and useful for investment decisions. On the other hand, generic ESG disclosures show no significant association with fund inflows. This suggests that investors prioritize specific ESG information over overall performance when making investment decisions.

The authors also examine the relationship between ESG disclosures and future fund returns. They find that neither specific nor generic ESG disclosures have a significant impact on risk-adjusted returns. However, funds with specific ESG disclosures attract more investment, indicating that investors place importance on specific ESG factors independent of performance. The study also reveals that investors react more positively to positive historical returns when accompanied by specific ESG disclosures, indicating that detailed information in the disclosures elicits stronger market reactions.

The study considers the influence of climate change on investor focus towards ESG disclosures. During periods of heightened climate concern, there is a stronger positive correlation between specific ESG disclosures and fund flows compared to periods of low climate concern. This suggests that investors pay closer attention to specific ESG disclosures to assess and mitigate climate-related risks in fund portfolios. It is also noted that investors are more drawn to the length and ranking of specific ESG disclosures within the prospectuses, rather than their specificity.

In summary, the study highlights the significance of specific ESG disclosures in mutual fund prospectuses. These disclosures play a crucial role in attracting investor attention and have an incremental impact on fund inflows. Investors value detailed and precise information regarding ESG factors and respond more favorably to positive historical returns when accompanied by specific ESG disclosures. The research acknowledges the growing importance of climate-related concerns in shaping investors’ preferences for ESG disclosures. Overall, the study provides valuable insights into the association between ESG disclosures and investor attention in the context of mutual funds.


Shi, H., Lu, H., Lee, J. B. (2023), ESG disclosure and investors’ attention: Evidence from Mutual fund prospectuses, CFA Institute Asia-Pacific Research Exchange Publishing