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Do investors care about sustainable investment targets? An assessment using the sustainable finance disclosure regulation

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  • Badenhoop, Nikolai
  • Mücke, Christian

Abstract

This paper analyzes the impact of disclosures of sustainable investment targets under the EU Sustainable Finance Disclosure Regulation (SFDR) on mutual fund flows. Using a staggered difference-in-differences setup and focusing on retail-oriented index funds, we find that sustainable investment targets have a temporarily positive impact on fund flows in comparison to funds without sustainable investment targets. Furthermore, we find a negative linear relationship between sustainable investment targets and fund flows. While lower targets attract higher fund inflows, higher targets result in significantly lower or even no inflows. Our results suggest that up to a target level of 20% in sustainable investments, index funds can attract more inflows. This suggests a trade-off between sustainability commitments and performance considerations.

Suggested Citation

  • Badenhoop, Nikolai & Mücke, Christian, 2025. "Do investors care about sustainable investment targets? An assessment using the sustainable finance disclosure regulation," SAFE Working Paper Series 457, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:325502
    DOI: 10.2139/ssrn.5474749
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    References listed on IDEAS

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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