Impact of morningstar sustainability rating on mutual fund flow: evidence from Thailand

This study investigates the impact of Morningstar Sustainability Ratings on Thai mutual fund flows, focusing on three aspects: the impact of the ratings' introduction, the differential effects of varying ESG ratings, and the influence of ESG ratings during the COVID-19 pandemic. The analysis encompasses various methodological approaches, including event studies, propensity score matching, cross-sectional, and panel regression analyses, to provide comprehensive insights into investor behavior to Morningstar Sustainability Ratings. Globally, sustainability ratings have a significant impact on mutual fund flows. This study finds that there is a strong initial impact following the publication of the Morningstar Sustainability Ratings, particularly for high ESG-rated funds, which attract substantial fund flows. However, this effect wanes over time. Additionally, the influence of sustainability ratings on Thai mutual fund flows during the COVID-19 pandemic suggests a "flight to quality," with investors prioritizing high sustainability rating funds over performance of funds.