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

The transition towards a more sustainable financial market demands transparency andtrust from investors, objectives also pursued by the Sustainable Finance DisclosureRegulation (SFDR). Specifically, carefully assessing the risk-adjusted performance ofsustainable funds empowers investors to make informed decisions in alignment withtheir ethical and financial objectives. This article contributes to the debate on the per-formance of socially responsible investment (SRI) funds in times of crisis by evaluatingthe risk-adjusted performance of a sample of SRI and conventional funds, ranked inlight of the SFDR, during the COVID-19 pandemic and the Russia–Ukraine war. Usinga two-step analysis, the results of the study show that funds with clear sustainabilityobjectives, as defined by Article 9 of the SFDR, were able to outperform conventionalfunds, but only a few months after the onset of the crisis periods, thus demonstratingpoor performance persistence. At the same time, sustainable funds with a focus onfinancial materiality, as defined by Article 8, were never able to generate significantlydifferent risk-adjusted performance from conventional funds. Our results show thatthe lack of performance persistence of Article 9 funds prevents an effective hedgingrole for investment strategies that consider extra-financial criteria. They also confirmthat the classification criteria introduced by the SFDR still need to be more specificand create more transparency in financial markets