Corporate SDG performance and investor trading behavior

This paper employs a novel sustainability rating from Robeco to examine the response of investors to firms’ SDG performance. We explore the underlying mechanism from the perspective of corporate reputation and financial performance. Our finding suggests that better SDG performance leads to a net outflow of funds, especially from individual investors. Such implication may be due to the existence of greenwashing behaviors by management, as firms’ sustainability performance in the society dimension significantly improves its reputation, but not its financial performance. Furthermore, the negative impact of SDG performance on individual investors’ fund flows becomes markedly pronounced in state-owned, heavily polluting, Northwest region enterprises and after the introduction of the “dual carbon” targets.