In South Korea, performance matters more than ESG

Helena Yu, Head of Asia Research (Shanghai/Taipei)

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Worldwide, the emphasis on sustainability is fuelling fund flows into ESG investments, driving the growth of green bonds and other sustainability-focused investments. This review summarises a study on Korean fund investors’ sensitivity to past performance and volatility, exploring the differences between ESG and non-ESG funds. By understanding the motivations of ESG investors, it may be possible to attract more funds into sustainable investments.


In this literature review, we summarise “A Study on Environmental, Social and Governance Fund Performance and Fund Flow: Evidence From Korea”. This paper was co-authored by Dongchul Kwak, Yu Kyum Kim and Il Sook Kwon and published on Frontiers.


This paper applied four tests:

1. Hypothesis: ESG fund investors are generally less sensitive to past performance compared to non-ESG investors.

Finding: Fund flows were correlated to past performance to a similar degree for both ESG and non-ESG funds.

2. Hypothesis: Sensitivity to negative fund performance is weaker in ESG funds than in non-ESG funds.

Finding: Positive performance had a consistently bigger effect on fund flows than negative performance, and this asymmetry was slightly higher in ESG funds.

3. Hypothesis: Performance volatility has a lower effect on fund outflows in ESG funds than in non-ESG funds.

Finding: Both ESG and non-ESG funds were sensitive to performance volatility, and there was almost no difference between them in terms of the impact of volatility on fund flows.

4. Hypothesis: Sensitivity to volatility is asymmetric according to fund performance, and the asymmetry is weaker in ESG funds than in non-ESG funds.

Finding: The correlation between fund flow and performance volatility was asymmetric, with almost no difference between ESG and non-ESG funds.

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