To what extent do Article 8 funds demonstrate a superior sustainability performance compared to index funds, and is there evidence of greenwashing in the Article 8 fund market?

Abstract

This master’s thesis examines the sustainability performance of Article 8 funds under the EU’s Sustainable Finance Disclosure Regulation (SFDR). By analyzing a comprehensive dataset acquired from Morningstar’s database from May 2020 to February 2023 and utilizing panel regression analysis, we scrutinize whether these funds outperform conventional index funds in sustainability metrics. The results reveal that Article 8 funds consistently yield superior sustainability ratings, underscoring the SFDR regulation’s efficacy in enhancing transparency and mitigating potential greenwashing. This is in stark contrast to previous studies suggesting ambiguities in SFDR categories. Moreover, an emerging positive correlation between sustainability ratings and financial returns from December 2021 indicates that sustainable investing is increasingly rewarding. Our findings provide valuable insights into the sustainable finance landscape, demonstrating the pivotal role of SFDR in promoting sustainability and transparency in funds.