Is the European Union (EU) Sustainable Finance Disclosure Regulation (SFDR) effective in shaping sustainability objectives? An analysis of investment funds' behaviour

The transition towards a more sustainable financial market demands transparency and trust from investors, objectives also pursued by the Sustainable Finance Disclosure Regulation (SFDR). Specifically, carefully assessing the risk‐adjusted performance of sustainable funds empowers investors to make informed decisions in alignment with their ethical and financial objectives. This article contributes to the debate on the performance of socially responsible investment (SRI) funds in times of crisis by evaluating the risk‐adjusted performance of a sample of SRI and conventional funds, ranked in light of the SFDR, during the COVID‐19 pandemic and the Russia–Ukraine war. Using a two‐step analysis, the results of the study show that funds with clear sustainability objectives, as defined by Article 9 of the SFDR, were able to outperform conventional funds, but only a few months after the onset of the crisis periods, thus demonstrating poor performance persistence. At the same time, sustainable funds with a focus on financial materiality, as defined by Article 8, were never able to generate significantly different risk‐adjusted performance from conventional funds. Our results show that the lack of performance persistence of Article 9 funds prevents an effective hedging role for investment strategies that consider extra‐financial criteria. They also confirm that the classification criteria introduced by the SFDR still need to be more specific and create more transparency in financial markets.

italicGross R_{it} goodbreak= \frac{1 + R_{it}}{1 - {DailyTER}_{i}} goodbreak- 1,

where R it represents the daily return of fund i on day t and DailyTER i represents the daily TER relating to fund i .…”

Section: Methodsmentioning

confidence: 99%

Section: Theoretical Background and Hypothesismentioning

confidence: 99%

Section: Theoretical Background and Hypothesismentioning

confidence: 99%

Section: Theoretical Background and Hypothesismentioning

confidence: 99%

mentioning

confidence: 99%

See 3 more Smart Citations

Sustainable finance disclosure regulation insights: Unveiling socially responsible funds performance during COVID‐19 pandemic and Russia–Ukraine war

Cosma,

Cucurachi,

Gentile

et al. 2023

Cultural dimensions and sustainability disclosure in the banking sector: Insights from a qualitative comparative analysis approach

Nicolò,

Zanellato,

Esposito

et al. 2024

This study adopts an innovative, holistic research approach based on fuzzy set qualitative comparative analysis (fs‐QCA) to deeply delve into national cultural dimensions' role in affecting banks' sustainability disclosure practices in the Eastern European (EE) region. Accordingly, this study aims to identify whether one or more configurations of cultural dimensions derived from Hofstede's national culture framework are conducive to higher levels of sustainability disclosure, using a sample including the five largest banks in each country of the ‘Bucharest Nine’ (B9) area over 2018–2022 period. Results evidence that sustainability disclosure patterns are not homogeneous among the banks operating in B9 countries. After the introduction of Directive 95/2014/EU, banks in some countries maintained relatively constant levels of sustainability disclosure, while others experienced steady growth rates. No cultural dimension alone would likely determine higher sustainability disclosure levels among B9 banks, confirming that normative pressures influencing EE banks' sustainability disclosure practices result from a combination of more cultural facets. In particular, fs‐QCA highlights a bundle of cultural dimension configurations that mould stakeholders' expectations in investigated countries, exerting pressures on banks to enhance their transparency on sustainability issues. The presence of power distance recurs in most configurations as a factor enabling higher sustainability disclosure levels. On the other hand, in most cases, the presence of uncertainty avoidance and long‐term orientation is conducive to higher banks' sustainability and transparency.

Decontesting an essentially contested concept: The standardization of sustainable finance

Boiral,

Brotherton,

Gilbert‐Parisée

et al. 2024

The aim of this article is to investigate how the standardization process and the public consultations carried out in the development of new sustainable finance standards and laws tend to shape the decontestation of practices in this field. The analysis of 255 comment letters submitted by various stakeholders in the context of these public consultations shows the dual role of standardization as a mechanism for both the decontestation and the (re)contestation of sustainable finance. This article makes important contributions to the emerging literature on the governance of sustainable finance through initiatives that are meant to improve the transparency of disclosures in this field and prevent investor misconduct. In light of Gallie's theory of essentially contested concepts, this article also contributes to the literature on the challenges of developing sustainability standards and the implications of adopting practices centered on concepts whose meanings and applications are the subject of endless disputes.