Safe Haven: The ESG Investment of Funds Under the Industry Contagion Risk

ABSTRACT

This study examines the role of ESG investments as a safe haven for Chinese mutual funds against industry contagion risk. Driven by the scarcity of alternative risk‐mitigation tools, our findings indicate that fund managers pragmatically use ESG investments as a safe haven during periods of industry‐wide shock. Further analysis reveals that female managers and those with personal experience of extreme climate events are more inclined to adopt ESG strategies. Consequently, our study not only documents the adoption of ESG safe haven strategies among fund managers but also broadens the perception that such ESG investments are made solely to cater to investors.