Green Window Dressing in European ESG Funds

Sammanfattning

This study examines the prevalence of green window dressing among EU-domiciled SFDR Article 9 equity mutual funds. Green window dressing refers to the practice of temporarily adjusting fund holdings around disclosure dates to present a more sustainable portfolio to investors. Building on the methodology of Parise and Rubin (2025), this study uses return gap analysis and ESG beta comparisons to identify abnormal trading around disclosure dates and whether it serves to overstate ESG exposure. We document a significant return gap, consistent with disclosure-related trading. However, this trading does not reflect a significant change in ESG exposure. Contrary to U.S. evidence, we find no support for green window dressing among EU-domiciled funds. This study provides the first empirical test of green window dressing in the highly regulated EU ESG climate. The results suggest that stricter ESG regulations and higher levels of ESG maturity in the EU may limit the prevalence of green window dressing.