The Economics of Greenwashing Funds - Professor Yong Chen

Event Date: 29 April 2026

Speaker: Professor Yong Chen, Texas A&M University

Venue: Strathclyde Business School, Stenhouse Wing, SW108

Time: 2pm

Abstract:

This paper examines the benefits and costs of greenwashing in mutual funds. We identify greenwashing funds by analysing their ESG-related disclosures using large language models (LLMs) alongside green investments. Greenwashing funds charge higher fees while attracting greater flows, with investors exhibiting tolerance for poor performance. However, they face higher regulatory and reputational costs. ESG-related comment letters issued by the SEC trigger outflows from greenwashing funds, spilling over to non-greenwashing funds within the same family. SEC’s scrutiny reduces future green disclosures, but its effectiveness weakens when SEC faces human capital constraints. Finally, institutional and retail investors respond differently to greenwashing behavior.

Published: 9 April 2026