Sustainable Investing and Fund Performance: Evidence From Closed-End Funds Under the SFDR

As ESG considerations have become increasingly central to investment strategies, sustainability-oriented investing has attracted growing attention. This paper examines whether closed-end equity funds classified under SFDR Articles 8 and 9 exhibit different financial performance from conventional Article 6 funds. Using a cross-sectional regression on 56 closed-end equity funds, the analysis controls for volatility, fund size, and geographic exposure. The findings show that SFDR classification is significantly associated with returns: Article 8 and Article 9 funds underperform their Article 6 counterparts over a three-year horizon. Volatility is negatively associated with performance, while fund size and geographic exposure are not statistically significant. The paper suggests that this underperformance may reflect shortterm market conditions and that sustainability-related benefits may materialize over longer horizons.