Unveiling the impact of SFDR on unlisted real estate funds: a J-Curve and panel regression analysis

Abstract

Purpose

This paper investigates the relationship between the sustainable finance disclosure regulation (SFDR) and the performance of unlisted real estate funds.

Design/methodology/approach

While existing literature has primarily focused on the impact of voluntary sustainability disclosure, such as certifications or reporting standards, this study addresses a significant research gap by constructing and analyzing the financial J-Curve of 40 funds under the SFDR. The authors employ a panel regression analysis to examine the effects of different SFDR categories on fund performance.

Findings

The findings reveal that funds categorized under Article 8 of the SFDR do not exhibit significantly poorer performance compared to funds categorized under Article 6 during the initial phase after launch. On average, Article 8 funds even demonstrate positive returns earlier than their peers. However, the panel regression analysis suggests that Article 8 funds slightly underperform when compared to Article 6 funds over time.

Practical implications

While investors may not anticipate lower initial returns when opting for higher SFDR categories, they should nevertheless be aware of the limitations inherent in the existing SFDR labeling system within the unlisted real estate sector.

Originality/value

To the best of our knowledge, this study represents the first quantitative examination of unlisted real estate fund performance under the SFDR. By providing unique insights into the J-Curves of funds, our research contributes to the existing body of knowledge on the impact of sustainability regulations in the financial sector.

Citation

Gloria, B., Leutner, S. and Bienert, S. (2024), "Unveiling the impact of SFDR on unlisted real estate funds: a J-Curve and panel regression analysis", Journal of Property Investment & Finance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JPIF-01-2024-0006