Moral mentor of the company? Multifaceted influence of sustainable and responsible funds on corporate social responsibility disclosure in China

This study investigates whether sustainable and responsible investment (SRI) funds can serve as “social responsibility mentors” of focal firms in a Chinese context. On this basis, we posit that firms’ greenwashing motives may lead to a bias between information disclosure and actual performance in corporate social responsibility (CSR). Using data from China’s publicly listed companies, we find a U-shaped relationship between SRI fund ownership and CSR disclosure quality; intrinsic and extrinsic greenwashing motives can weaken this curvilinear relationship. Furthermore, we examine the influence mechanism and prove that SRI funds use social screening strategies as an indirect channel to affect CSR disclosure. This mechanism is also verified when we consider SRI funds’ number and investment portfolio. We conclude that SRI funds have a multifaceted influence on the CSR disclosure of focal firms, enriching the understanding of SRI funds and corporate sustainability in the capital markets of emerging economies.