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.
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