Effects of Anti-ESG Legislation: Evidence from the Mutual Fund Industry [Job Market Paper]

5th Annual FIASI-Gabelli School of Business Sustainable Finance Research Competition Finalist (2025)

Presented at: Rotman Finance Seminar 2024, 6th Canadian Sustainable Finance Network Conference 2025 (scheduled), EFA 2025 (scheduled)

Abstract: This paper studies how imposing restrictions on public pension funds over ESG investments affects the mutual fund industry. I exploit state-level staggered variation in the recent implementation of two types of anti-ESG laws targeting state and local public pension funds: anti-boycott and anti-ESG investing laws. Using a difference-in-differences analysis based on mutual funds' heterogeneous exposure to these laws within states, I show that mutual funds align their portfolios with the restrictions imposed on state and local public pension funds by anti-ESG laws. I find that mutual funds reduce portfolio ESG scores by 1.5% and allocate more assets to the fossil fuel industry in response to anti-boycott laws, while reducing ESG scores by 3 - 12% in response to anti-ESG investing laws. These changes positively influence fund flows and have spillover effects on out-of-state and international institutional investors. Overall, the results suggest that anti-ESG legislation targeting state and local public pension funds has significant implications for the mutual fund industry and other institutional investors.

How Does Menu Design Affect College Savings Plans' Attractiveness? with Alexey Vasilenko

Presented at: University of Toronto 2023, MFA 2024, FMA 2024

Abstract: This paper studies how menu design affects household participation and contributions in 529 college savings plans. We exploit two types of state-level staggered variation in plan menu design: the inclusion of investment options tailored to different risk tolerance levels and the addition of an alternative menu through the creation of an additional in-state 529 plan. Using a difference-in-differences framework, we show that implemented menu design changes have diverse effects on household investments in 529 college savings plans. We find that both the inclusion of risk-based target date options and the addition of alternative menu increase in-state participation and contributions to college savings plans. Expanding the menu to include static asset allocation options raises household contributions but not participation, while having a positive spillover effect on flows to other investment options.  Our results suggest that modifying the menu design of 529 college savings plans can enhance investment in human capital.

Work in Progress

Costs of ESG Investing in the ETF Space: International Evidence

 Macro-Financial Linkages: the Role of Liquidity Dependence, BIS Working Paper No.716, 2018

with Alexey Ponomarenko and Sergey Seleznev 

When Are Credit Gap Estimates Reliable? Economic Analysis and Policy 67 (2020): 221-238

with Elena Deryugina and Alexey Ponomarenko