We consider a network of equity mutual funds characterized by different levels of compliance with Environmental, Social, and Governance (ESG) aspects. We measure the impact of portfolio liquidation in a stress scenario on funds with different ESG rates. Fire sales spillover from portfolio liquidation propagates from one fund to another because of indirect contagion mediated by common asset holdings. We find that the vulnerability of funds to contagion decreases with the level of ESG compliance. Contagion is less effective for higher ranked funds than for lower ranked ones. In particular, for different levels of portfolio liquidation, the relative market value loss of the highest ESG ranked funds is lower than the loss experienced by the lowest ESG ranked counterpart.
 

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