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

Figures & data

Figure 1. Investment funds by Domicile

Figure 2. Investment funds by Investment area

Table 1. Investment funds by Global Broad Category Group – SFDR Article 9.

SFDR Article 9
Asset class orientation	% of the total
Equity	68,98%
Fixed income	25,47%
Allocation	3,95%
Alternative	0,76%
Money market	0,35%
Miscellaneous	0,35%
Convertibles	0,08%
Property	0,05%

Table 2. Investment funds by Global Broad Category Group – SFDR Article 6.

SFDR Article 6
Asset class orientation	% of the total
Fixed income	35,86%
Equity	35,25%
Allocation	17,62%
Alternative	6,37%
Money market	1,87%
Convertibles	1,50%
Miscellaneous	0,75%
Commodities	0,66%
Property	0,13%

Table 3. Variables considered in the analysis.

Data object	Description
Fund size	The total amount of financial resources under management by the investment fund
Manager tenure	It indicates the expertise of the management in terms of number of years as a portfolio manager for the one having the longest tenure. For managers enrolled for less than six months (and for whom we have biographical information available), a value of 0 appears
Management fee	The management fee is measured as the percentage deducted from an investment’s average net assets as an incentive for management premium performances on top of their payrolls
SRI	The investment’s Summary Risk Indicator (SRI) explains the level of risk with respect to the Packaged Retail and Insurance based Investment Product (PRIIP) classification. It ranges from 1 (lowest risk) to 7 (highest risk)
NAV	The share price of the fund. It is given by dividing the total net assets by the total number of shares
Financial return	The financial return on the funds’ financial activities an investor would have received before paying the expenses
Sustainability rating	The Sustainability Rating ranges from ‘Low’ to ‘High’, evidencing five types of intermediate scores. Higher scores for a fund indicate that, on average the investments are made in fewer companies with a negative sustainability performance under Sustainalytics’ methodology, and therefore invests in companies showing better performance on the sustainability component
Fund age	The number of years a financial product has been operating on the market
Sectors	It indicates the four main industries in which each Fund declares its asset allocations, based on Morningstar criteria. The cyclical sector indicates raw material, real estate, and financial services. The defensive sector indicates utilities and healthcare. The sensitive sector indicates technology- and energy-intensive industries. The multisector indicates funds that mix the previous three categories

Table 4. Management fee descriptive statistics.

Management fees	Art. 9	Art. 6
Number of observations	3717	49059
Mean	0,85	0,88
Median	0,75	0,80
Mode	1,50	1,50
Standard deviation	0,57	0,52
Variance	0,32	0,27

Table 5. Funds by sustainability rating.

Sustainability rating	Art. 9	Art. 6
High	29,19%	8,52%
Above average	43,64%	23,33%
Average	21,34%	40,94%
Below average	4,86%	20,68%
Low	0,96%	6,52%

Table 6. Set of variables – SFDR Article 9.

SFDR Article 9
Data objects	Min	Max	Mean	Median	Standard deviation
AVG Tenure	0,08	11,83	3,76	3,17	2,68
NAV	0,26	487,64	114,89	114,91	99,96
Financial Return	−27,24	61,27	20,37	25,13	14,08
Fund Size	6762,88	3494175600,33	722107993,64	397048832,00	780937856,41
SRI Value	1,00	5,00	3,66	4,00	0,88
Fund Age	0,08	11,47	2,92	2,06	2,63
Sustainability Rating	1,00	5	3,95	0,89	4

Table 7. Set of variables – SFDR Article 6.

SFDR Article 6
Data objects	Min	Max	Mean	Median	Standard deviation
AVG tenure	0,00	17,04	5,87	5,17	3,78
NAV	0,01	335,70	73,38	42,76	70,00
Financial return	−25,45	32,35	2,72	0	9,34
Fund size	0,00	1749724790,50	313368425,27	140927228	395137191,36
SRI value	2,00	5,00	3,27	3	0,92
Fund age	0	21,56	6,61	5,24	5,10
Sustainability rating	1	5	3,06	1,02	3

Table 8. Sector categories – SFDR Articles 9 and 6.

Sector	Art. 9	Art. 6
Cyclical	5,79%	11,10%
Defensive	5,25%	2,15%
Multisector	44,29%	68,63%
Sensitive	44,67%	18,13%

Table 9. Outcome of the t-test,

	Art. 6		Art.9
Mean	3,04		3,9
Variance	1,03		0,72
Observations	49059		3717
Hypothesized mean difference	0
df		3828
t Stat		−55,60
P(T< = t) one tail		0.00
t Critical one-tail		1,65
P(T< = t) two-tail		0.00
t Critical two-tail		1,96

Table 10. Correlation Matrix for the database of SFDR Article 9 funds.

	Fund size	NAV	Manager average tenure	Financial return	SRI value	Sustainability rating	Fund age
Fund size	1	0.07	0.09	0.16	0.06	0.02	0.07
NAV	0.07	1	0.17	0.08	0.07	0.01	0.12
Manager average tenure	0.09	0.17	1	−0.01	0.01	0.05	0.17
Financial return	0.16	0.08	−0.01	1	0.25	−0.07	0.03
SRI value	0.06	0.07	0.01	0.25	1	−0.06	0.04
Sustainability rating	0.02	0.01	0.05	−0.07	−0.06	1	0.05
Fund age	0.06	0.12	0.17	0.03	0.04	0.01	1

Table 11. Correlation Matrix for the database of SFDR Article 6 funds.

	Fund size	NAV	Manager average tenure	SRI
Value	Financial return	Sustainability rating	Fund age
Fund size	1.00	−0.06	0.05	0.01	0.02	−0.01	0.01
NAV	−0.06	1.00	0.05	−0.01	0.10	0.07	0.06
Manager average tenure	0.05	0.05	1.00	0.04	0.03	−0.01	0.22
SRI value	0.01	−0.01	0.04	1.00	0.36	−0.28	0.06
Financial return	0.02	0.10	0.03	0.36	1.00	0.02	0.03
Sustainability rating	−0.01	0.07	−0.01	−0.03	0.02	1.00	0.01
Fund age	0.00	0.06	0.22	0.06	0.03	0.00	1.00

Table 12. Results of Model 1.

Model 1
Dependent variable: Management fee	Article 9	Article 6
Independent variables
Financial return	5,97*** (1,32)	2,89*** (0,35)
Fund size	0,01* (0,02)	−0,01*** (0,01)
NAV	0,57*** (0,11)	−0,07 (1,06)
Manager AVG tenure	11,4* (4,563)	1,66 (1,06)
SRI value	−68,66** (23,99)	118,7*** (4,79)
Sector-defensive	240,8*** (65,07)	86,03*** (25,37)
Sector-multisector	−172,2*** (48,43)	2,11 (11,19)
Sector- sensitive	37,26 (47,59)	9,21 (12,93)
Fund age	7,85 (4,62)	15,11*** (0,73)

Table 13. Results of Model 2.

Model 2
Dependent variable: Management fee	Article 9	Article 6
Independent variables
Sustainability rating	29,09* (13,22)	8,93** (3,43)
Fund size	0,05** (0,01)	−0,01*** (0,01)
NAV	0,59*** (0,11)	−0,03 (0,05)
Manager AVG tenure	9,22* (4,57)	1,77 (1,06)
SRI value	−42,86 (23,53)	133*** (4,47)
Sector-defensive	221,3*** (65,09)	87,71*** (25,42)
Sector-multisector	−192,1*** (49,44)	3,527 (11,21)
Sector-sensitive	39,88 (48,05)	11,28 (12,94)
Fund age	8,46 (4,63)	15,11*** (0,74)