This paper assesses the environmental performance of sustainability-related investment funds compared to conventional ones across three dimensions: financed activities, portfolio carbon footprint, and investment in firms with ambitious science-based targets. We identify ESG funds using Morningstar (MS) strategies, the Sustainable Finance Disclosure Regulation’s Article 8/9 classification, and funds’ self-naming. We find that the greenest funds invest more in low-carbon sectors, but their carbon footprints are comparable to conventional funds. Also, MS Low-Carbon and Art.8 funds tend to invest in the same sectors as conventional funds but target less polluting firms. Overall, results reveal inconsistencies between ESG labels and outcomes, highlighting the limited role these funds currently play in financing the transition to a net-zero economy
