Seminar (Dept. of Accounting)

Title：SEC Oversight on ESG Disclosure and Practice: Evidence from Investment Funds

Speaker：Chengzhu Sun, Assistant Professor, Hong Kong Polytechnic University

Time：10:00-11:30, November 11th, 2024 (Monday)

Venue：Room 1008, Mingde Business Building

Language：Chinese & English

ABSTRACT:

In this study, we examine whether the SEC’s oversight and enforcement on ESG related issues have any effect on investment funds’ disclosure and investment strategies. Exploiting the establishment of the SEC’s Climate and ESG Task Force Division (Task Force hereafter) as a plausible exogenous shock to ESG-related oversight, we find that relative to non-ESG funds, ESG funds tilt their investment more towards firms with better ESG performance after the launch of the Task Force. Such change in ESG-tilted investment is more pronounced among ESG funds located closer to the SEC and those with poorer pre-launch fund-level ESG performance. We also find that ESG funds tend to increase their ESG-related disclosure after the launch of the Task Force, and use more uncertain and weak tone in their ESG disclosure to build safe harbour when facing greater oversight. We find a similar effect on the investment and disclosure changes for enforced ESG funds following the enforcement actions by the Task Force and some deterrence effects on the non-enforced ESG funds with poor pre-enforcement fund-level ESG performance. Overall, our results suggest both the oversight and actual enforcement actions pressure ESG funds to change their investment and disclosure decisions, substantiating the benefits of the SEC oversight on ESG disclosure and compliance in the asset management industry.

SHORT BIOGRAPHY:

Chengzhu Sun is an Assistant Professor of School of Accounting and Finance, Hong Kong Polytechnic University. She obtained the Ph.D. degree in accounting in 2021 and master degree in environment in 2016 from the Hong Kong University of Science and Technology. She also visited Columbia University for one semester during her PhD study. Her research interests center on information economics, regulations/laws, and ESG, and she teaches ESG investment and green finance at master level. Her papers have been published on Review of Financial Studies, Accounting Review, Management Science, and Contemporary Accounting Research.