This study presents a PRISMA-based conceptual review of the key challenges and emerging opportunities in sustainable mutual fund investments. Drawing on a systematic search of Scopus, Web of Science, Google Scholar, and Science Direct, thirteen influential theoretical and empirical studies published between 2000 and 2025 were identified and synthesized. The review integrates Signaling Theory, Stakeholder Theory, and Modern Portfolio Theory (MPT) to develop a unified framework that explains how ESG disclosure, investor trust, regulatory structures, and fund performance are interrelated. Findings show that transparent ESG reporting acts as a credible market signal that enhances investor confidence and legitimacy, thereby increasing capital flows into sustainable funds. Stakeholder engagement further strengthens investor relationships, while ESG-aligned diversification contributes to improved risk-adjusted returns. Despite this potential, the sector continues to face obstacles such as inconsistent ESG metrics, greenwashing, regulatory ambiguity, and fragmented data systems. The proposed framework highlights the moderating role of regulatory evolution and technological innovation in improving transparency and reducing sustainability-related risks. This review provides a theoretically grounded and empirically informed foundation for future research aimed at strengthening the credibility, performance, and governance of sustainable mutual funds.