Do sustainability signals diverge? An analysis of labeling schemes for socially responsible investments *

Sofia Brito-Ramos, Maria Céu Cortez and Florinda Silva
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Sofia Brito-Ramos: ESSEC Business School
Maria Céu Cortez: School of Economics and Management - Universidade do Minho = University of Minho [Braga]

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Abstract: Several labels for sustainable investment funds sponsored by government and nonprofit organizations (GNPOs) have emerged in Europe. This paper examines the coherence of the signals sent by these sustainable labels versus those from the private sector. While some GNPO-labeled funds are perceived as bearing high Environmental, Social and Governance (ESG) risks, we find that labeled funds are more likely to be assessed as top ESG funds by private rating providers. Furthermore, equity funds with governmental and multiple labels are more likely to show better ESG ratings. Additionally, GNPO-labeled funds show greater alignment with article 9 of the Sustainable Finance Disclosure Regulation and tend to exhibit ESG terminology in their name, consistent with internal signals of sustainability coherence with GNPO labels. However, our research draws attention to the existence of sustainable signals that are not always coherent, jeopardizing their role as efficient tools for promoting sustainability.

Keywords: asymmetric information government labelling nonprofit organizations SFDR socially responsible investments sustainable finance third-party certifications; asymmetric information; government; labelling; nonprofit organizations; SFDR; socially responsible investments; sustainable finance; third-party certifications (search for similar items in EconPapers)
Date: 2022-11-28
New Economics Papers: this item is included in nep-agr, nep-des and nep-env
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