Policy Brief: Gender Differences in Sustainable Investment Choices: Implications for the EU’s Reform of the SFDR

The EU Commission’s proposed SFDR reform replaces transparency-based fund classifications with sustainability-related product categories. New experimental evidence from Bohnet et al. (2025) shows that these categories influence retail investment decisions at least as much as disclosure scopes and prove more decisive than disclosure scopes when investors are exposed to both simultaneously. Women respond particularly strongly to sustainability-related labels, suggesting that clearer categories could both boost sustainable investment and narrow gender gaps in market participation. However, investors consistently prefer ‘Sustainable’ over ‘Transition’ funds, raising credibility concerns for transitioning industries that are arguably most in need of capital.

In this joint policy brief, PECan research group and Climate & Company derive six recommendations for the SFDR reform. The research was funded by the Federal Minsitry for Research, Technology and Space.

Here’s our key findings:

1) Product categories dominate investor attention.

When choosing between funds, retail investors assign at least as much weight to sustainability product categories as to how extensively a fund discloses its sustainability activities – and when the two signals coexist, the category label proves more important. This finding supports the EU’s proposed shift away from disclosure-focused classifications.

EU legislators should anchor the ‘Sustainable’, ‘Transition’ and ‘ESG Basics’ labels in strict, transparent and intuitive portfolio criteria and enforce them consistently to prevent greenwashing.

2) Women respond more strongly to sustainability labelling.

Women place greater value on sustainability product category labels compared to men. Given that financial literacy and confidence are key determinants of female market participation (Bucher-Koenen et al., 2025), clearer labeling may also lower barriers to market entry for women – though this participation effect requires empirical validation.

EU legislators should combine SFDR 2.0 with targeted financial and sustainable finance literacy programs, especially for women and first-time investors, to maximize inclusion benefits.

3) Investors prefer ‘Sustainable’ over ‘Transition’ funds.

This persists no matter how transparently a fund reports its sustainability activities, posing a credibility challenge for transitioning industries that are in need of additional capital to drive real-world decarbonization.

EU legislators should strengthen the credibility of the ‘Transition’ label through clearer transition-pathway requirements, intermediate targets, and disclosure of real-world impact to counter investor scepticism.