More Signals or Better Signals? Sustainability Signals and Investors' Performance Sensitivity

Jean-Baptiste Hasse, Sullivan Hué, Christelle Lecourt and Léo Loubradou
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Jean-Baptiste Hasse: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Sullivan Hué: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Christelle Lecourt: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Léo Loubradou: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: The proliferation of sustainability signals raises a key question: when investors face multiple and overlapping sustainability claims, which signals actually matter for their investment decisions? Using a large panel of European equity mutual funds, we examine differences in investor behavior across sustainability signals through the flow–performance relationship. We find substantial heterogeneity across signals. Sustainability-related fund names, SFDR Article 9 classification, and sustainability labels are associated with lower sensitivity to very strong long-term performance, consistent with stronger sustainability preferences. Fund names and labels are also associated with lower sensitivity to poor short-term performance, consistent with greater investor loyalty. Other widely used signals show little evidence of such behavior and may instead be associated with stronger performance chasing. We further show that combining signals associated with sustainabilityoriented investor behavior reinforces these patterns. Overall, our results show that sustainability signals are not interchangeable and are associated with markedly different patterns of investor behavior.

Keywords: Sustainability Signals; Signal Credibility; Sustainable Investing; Mutual Funds; Flow-Performance Relationship (search for similar items in EconPapers)
Date: 2026-10-05
Note: View the original document on HAL open archive server: https://hal.science/hal-05789092v1
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