This chapter examines the impact of sustainability disclosures on equity investments within the European Union (EU), at both the firm and fund levels. EU regulations, such as the Non-Financial Reporting Directive (NFRD) and its successor, the Corporate Sustainability Reporting Directive (CSRD), mandate detailed disclosures of social and environmental risks by large and listed companies. Despite improving transparency, these regulations impose significant recurring costs, including external auditing and assurance services, which affect corporate profitability and investor costs.Using firm-level data from the EuroStoxx 600 index (2009–2020) and fund-level data from Morningstar, this study employs regression analysis to evaluate the financial impacts. At the firm level, companies offset disclosure costs by increasing leverage, resulting in a significant rise in net-debt-to-enterprise-value. While these strategies maintain short-term profitability, they elevate long-term financial risks for equity investors. At the fund level, our findings reveal divergent cost implications for passive (ETFs) and active funds. Passive funds, especially those categorized under Article 8 of the EU’s Sustainable Finance Disclosure Regulation (SFDR), typically avoid transferring sustainability-related costs to investors. Conversely, active funds incur higher management fees for Article 8, reflecting additional resource demands. Article 9 funds across both fund types exhibit increased fees due to higher resource requirements. Our analysis highlights the dual cost burden for investors in active funds—indirectly through higher corporate leverage and directly via elevated management fees. ETFs offer a cost-effective alternative, particularly for Article 8 funds. The findings underscore the need for standardized ESG data and regulatory interventions to mitigate financial burdens. European sustainability regulations, while promoting sustainable finance, may amplify leverage and investment costs.