Run to the -sustainable- hills? An exploration of ESG fund flows in the US market in response to Flight-To-Safety periods

Abstract: Funds flowing into Environmental, Social, and Governance (ESG), Non-ESG, and Precious Metal funds (as a proxy to a safe haven asset) are analyzed for 440 such funds in the United States during Flight-To-Safety (FTS) episodes to determine if investors perceive safe-haven-like properties in ESG funds by shifting funds into this group. FTS episodes represent brief rotations of funds into safer assets to preserve capital during burst of market volatility. Looking at data for the last 10 years, the evidence herein suggests that for periods with FTS episodes, ESG funds see increasing flows when compared to the Non-ESG group and decreasing flows when compared to Precious Metals, albeit both results by a small difference, which can be interpreted as investors willing to move funds into ESG investments over Non-ESG, although not yet seeing ESG as an equally suitable safe haven alternative.