A0663
Title: Betting against sustainability: Evidence from US equity short selling activity
Authors: John Coadou - Amundi Asset Management / Université Paris Dauphine – PSL (France) [presenting]
Serge Darolles - Paris Dauphine (France)
Abstract: Institutional investors have increasingly incorporated environmental, social, and governance (ESG) factors into their investment policies. The integration of sustainability considerations into their decision-making processes has led to heightened demand for non-sin stocks, influencing asset prices. The literature suggests that the notable returns observed from sustainability investing are primarily driven by the significant price impact of ESG-related capital flows. Given that these investors operate under various constraints - such as the "long-only" mandate and ESG portfolio target scores - alternative investment firms may seek to benefit from a subsequent ESG premium. Monthly short sale data from the IHS Markit database is used to investigate whether hedge funds "bet against ESG" to benefit from this premium and generate positive arbitrage returns in flowing such strategies.
