The power of ESG transparency: The effect of the new SFDR sustainability labels on mutual funds and individual investors

Martin G. Becker, Fabio Martin and Andreas Walter

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: This paper analyzes the effect of the Sustainable Finance Disclosure Regulation (SFDR) on mutual funds and individual investors in the EU. First, we study whether affected funds increase their sustainability compared to a control group. Second, we examine if the regulation makes individual investors allocate more capital into more sustainable funds. In a difference-in-differences setting, we analyze the influence of the regulation on ESG fund scores and fund net inflows. Our results show that affected funds increase their sustainability rating after the policy intervention. Additionally, we find that a better ESG label leads to larger fund net inflows.

Keywords: Mutual fund; ESG; Sustainability ratings; Fund flows; Policy intervention (search for similar items in EconPapers)
JEL-codes: G11 G18 G23 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s1544612322000332

DOI: 10.1016/j.frl.2022.102708

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