18. Jo et al. (2022), in their recent study, Price of Clean Air: Evidence from Chinese ESG mutual funds, show that Chinese environmental, social, and governance (ESG) funds act as impact investments and thus sacrifice financial returns in exchange for clean air (Impact investing hypothesis). The ESG funds economically and statistically underperform (4.4%-4.8%) non-ESG funds during the high air pollution period. Their willingness-to-pay estimates suggest that investors may accept 1.6%-4.9% lower expected returns for ESG funds to combat air pollution.

However, the underperformance of ESG funds during the high air pollution period may also be due to the regulatory shutdown enforced by the government (Regulation hypothesis).

Think how to differentiate the impact investing hypothesis from the regulatory hypothesis, and explain briefly how to conduct such test.