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 and trust from investors, objectives also pursued by the Sustainable Finance Disclosure Regulation (SFDR). Specifically, carefully assessing the risk‐adjusted performance of sustainable funds empowers investors to make informed decisions in alignment with their ethical and financial objectives. This article contributes to the debate on the performance of socially responsible investment (SRI) funds in times of crisis by evaluating the risk‐adjusted performance of a sample of SRI and conventional funds, ranked in light of the SFDR, during the COVID‐19 pandemic and the Russia–Ukraine war. Using a two‐step analysis, the results of the study show that funds with clear sustainability objectives, as defined by Article 9 of the SFDR, were able to outperform conventional funds, but only a few months after the onset of the crisis periods, thus demonstrating poor performance persistence. At the same time, sustainable funds with a focus on financial materiality, as defined by Article 8, were never able to generate significantly different risk‐adjusted performance from conventional funds. Our results show that the lack of performance persistence of Article 9 funds prevents an effective hedging role for investment strategies that consider extra‐financial criteria. They also confirm that the classification criteria introduced by the SFDR still need to be more specific and create more transparency in financial markets.