We study the consequences of mandatory sustainable finance disclosure regulation (SFDR) for the money flows and investment behavior of mutual funds. We find that EU-regulated funds significantly improve the ESG profile of their investments relative to US mutual funds, holding for both the retail...

Using microdata on stock-level lending positions from German mutual funds, we show that active funds use the equity lending market to obtain information about short sale demand. Funds reduce long positions in response to these demand signals, which allows fund managers to front-run public...