German sustainable funds grow to €977bn

Despite weak net overall inflows, German sustainable funds reached €977 billion in the first quarter of 2024, according to figures published today.

The data, from the German funds trade body BVI, shows that, at €727 billion, retail funds accounted for around three quarters of the total volume in funds managed in accordance with articles 8 or 9 of the EU’s Sustainable Finance Disclosure Regulation.

So-called special funds “Spezialfonds” categorised as sustainable accounted for €250 billion, but, at 45%, grew at a much faster rate over the past 12 months than the 12% growth enjoyed by retail funds.

In both segments, the increase in assets was primarily due to reallocations of existing products and price increases in equities and bonds, the BVI said.

By contrast, new business was weak in the first quarter of 2024. While Spezialfonds recorded a modest net inflow of new money, retail fund investors withdrew a total of €3.3 billion from products with sustainability features while retail funds without sustainability features gained €7.1 billion.

Balanced and equity funds were particularly affected by the redemptions. As a result, net inflows into retail funds with sustainability features have been well below the figure for non-sustainable products in every quarter since the beginning of 2023.

Overall, Article 8 and 9 funds experienced a net outflow of over €11 billion within the last five quarters – while inflows into Article 6 funds amounted to almost €28 billion.

“The EU regulation of retail distribution is likely to be one of the main reasons for this development: retail investors often indicate ‘no’ when being asked about their sustainability preferences in order to retain full flexibility when selecting products,” the BVI said in the statement.

“In addition, even interested investors struggle due to the complexity of mandatory questions, such as the desired minimum proportion of environmentally-sustainable investments or adverse impacts that they would like to take into account.”

“The lack of definitions and standards means that required disclosures on sustainability features are often not comparable. This leads to additional uncertainty for many retail clients.

The European Commission last year launched a review of the Sustainable Finance Disclosure Regulation with the hope of ironing out some of these regulatory issues.

German fund industry grew by 9% year-on-year, shows BVI data

ESG regulation unfairly burdening smaller firms – BVI



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