Authors from Stanford University, Harvard University Business School (HBS), University of Amsterdam and London Business School have examined the impact of the EU’s Sustainable Finance Disclosure Regulation (SFDR) on investing; and found it failing to find any new inflows.

The SFDR classifies funds into three categories in an attempt to promote transparency and curb greenwashing grading them from “dark green” to “light green”. However, the paper finds that the SFDR had little effect on fund flows or portfolio sustainability.

The paper postulates that disclosures were ineffective in part because they offered little new or clear information beyond what investors could already infer from fund names and mandates.

The paper, published by the National Bureau of Economic Research, is likely to cause some head scratching as the EU seeks to revise the five-year-old SFDR as part of the wider drive by the EU to simplify its legislations and layers of bureaucracy.

In a more existential sense, these moves have called into question the EU’s desire of being a global regulator across sectors.

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