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Green Window Dressing

Author

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  • GIANPAOLO PARISE
  • MIRCO RUBIN

Abstract

This paper establishes that mutual funds strategically time their trades in environmental, social, and governance (ESG) stocks around disclosure dates to inflate their sustainability ratings. This claim is supported by three empirical findings. First, we show that funds' ESG betas increase shortly before disclosure and decrease shortly afterwards. Second, we document that post‐disclosure fund returns are higher but have lower ESG exposure than disclosed portfolios. Third, we provide evidence that ESG stock prices temporarily rise before disclosure and decline afterwards. Overall, we establish that green window dressing positively impacts fund sustainability ratings, performance, and flows.

Suggested Citation

  • Gianpaolo Parise & Mirco Rubin, 2025. "Green Window Dressing," Journal of Finance, American Finance Association, vol. 80(6), pages 3555-3588, December.
    • Handle: RePEc:bla:jfinan:v:80:y:2025:i:6:p:3555-3588
    DOI: 10.1111/jofi.13499
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    Cited by:

    1. Janssen, Bennet & Zhang, Youpeng, 2025. "Do retail investors care about ESG ratings?," ZEW Discussion Papers 25-074, ZEW - Leibniz Centre for European Economic Research.

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