Revealed Beliefs about Responsible Investing: Evidence from Mutual Fund Managers

We explore the relationship between US mutual fund managers' incentives to deliver high returns and their portfolio Environmental, Social, and Governance (ESG) performance. Mutual funds with managerial ownership (``skin in the game'') exhibit lower ESG performance than otherwise similar funds. This effect is stronger for managers paid to maximize assets under management. Co-investing managers are less likely to buy high-ESG stocks after exogenous shocks in the flow incentives to hold such assets. Overall, the results suggest that fund managers, on average, do not consider ESG selection an enhanced form of portfolio management to maximize risk-adjusted returns.