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Regulating ESG disclosure: capital allocation and investor heterogeneity

Author

Listed:
  • Marina Emiris

    (National Bank of Belgium, Research Department)

  • Joanna Harris

    (Chicago Booth School of Business.)

  • François Koulischer

    (University of Luxembourg.)

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.

Suggested Citation

  • Marina Emiris & Joanna Harris & François Koulischer, 2026. "Regulating ESG disclosure: capital allocation and investor heterogeneity," Working Paper Research 490, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202603-490
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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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