Green or brown: are article 8 & 9 fund portfolios different?

Abstract

This paper examines the extent to which the portfolios of green and conventional funds differ. We use non-metric multidimensional scaling to analyze the securities held by 6888 funds traded on European markets as of March 2023. This numerical methodology reduces the fund compositional matrix from thousands of dimensions to two dimensions, revealing patterns that can be studied graphically. We use the EU Sustainable Finance Disclosure Regulation's Articles 8 and 9 to classify green funds, and with few exceptions find that green fund portfolios are largely the same as conventional fund portfolios. A notable exception are energy sector funds, where there are distinct differences between the holdings of green and conventional funds. Our findings suggest that the EU's regulatory effort on sustainable finance has not yet delivered on anti-greenwashing objectives, and that green investing is doing little to shift investment allocations.