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

1 Pages Posted: 28 Nov 2021 Last revised: 11 Feb 2022

See all articles by Martin G. Becker

Martin G. Becker

University of Giessen - Department of Financial Services

Fabio Martin

University of Giessen - Department of Finance

Andreas Walter

University of Giessen - Department of Financial Services

Date Written: November 9, 2021

Abstract

This paper analyses 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 analyse 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 Interven- tion

JEL Classification: G11, G18, G23

Suggested Citation

Becker, Martin G. and Martin, Fabio and Walter, Andreas, The power of ESG transparency: the effect of the new SFDR sustainability labels on mutual funds and individual investors (November 9, 2021). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3970861 or http://dx.doi.org/10.2139/ssrn.3970861

Martin G. Becker

University of Giessen - Department of Financial Services ( email )

Gießen, 35394
Germany

Fabio Martin (Contact Author)

University of Giessen - Department of Finance ( email )

Giessen
Germany

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://https://www.uni-giessen.de/fbz/fb02/fb/professuren/bwl/walter

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