Mutual Funds, ESG and Gatekeeper Responsibility: Challenges and Resolution of Agency Conflicts

p class="MsoNormal"This paper considers the extent, and resolution, of agency conflicts in applying the Environment, Social and Governance (ESG) criteria and associated gatekeeping expectations to mutual funds. Drawing on the agency theory, the paper demonstrates that the manifestation of principal-agent and principal-principal-agent conflicts can erode mutual funds’ gatekeeping role encapsulated in ESG. Agency conflicts can be resolved by clear definitions of ESG in investment objectives, chief sustainability officer roles, investment diversification and categorisation, credible assurance services and investor educationo:p/o:p