Does Investor Attention Impact ESG ETF Performance?

The popularity of environmental, social, and governance (ESG) investing has soared over the past few years, with a surge in public attention toward sustainability and a heightened interest in ESG funds. This study aims to explore whether investors' focus on ESG investing has an impact on the performance of ESG ETFs. To assess investor attention, the authors use the Search Volume Index (SVI) from Google Trends and test the panel data consisting of US equity ESG ETFs. The findings indicate that investor attention plays a significant role in ESG ETF returns, which demonstrates that investors reflect their investment interests through trading. Furthermore, the study reveals that ESG ETFs underperformed the market over the 2021–2022 period and that ESG scores of ETFs positively influenced ETF returns. By using the SVI to measure investor attention directly, the authors provide valuable new insights into the impact of investor attention on ETF returns.