Regulating ESG disclosure: capital allocation and investor heterogeneity

Marina Emiris (), Joanna Harris () and François Koulischer ()
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Marina Emiris: National Bank of Belgium, Research Department
Joanna Harris: Chicago Booth School of Business.
François Koulischer: University of Luxembourg.

No 490, Working Paper Research from National Bank of Belgium

Abstract: We study how sustainability disclosure regulation affects mutual fund flows and portfolio choices, accounting for investor heterogeneity. Guided by a model of ESG investing under uncertainty, we exploit the introduction of the European Sustainable Finance Disclosure Regulation (SFDR) as a natural experiment, using granular fund–investor holdings data. We show that funds subject to higher disclosure requirements attract significantly larger inflows, particularly for funds with higher pre-regulation uncertainty. Institutional investors respond more strongly than retail investors, and investor trust in environmental labels amplifies these effects. We also find evidence that disclosure induces fund managers to increase portfolio greenness.

Keywords: Mutual funds; Disclosure Regulation; Trust; ESG ratings. (search for similar items in EconPapers)
JEL-codes: G11 G14 G23 Q56 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2026-03
New Economics Papers: this item is included in nep-acc, nep-env, nep-fmk and nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202603-490

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