Assets in SFDR funds rocket but number of funds is “unexpected”

SFDR funds, ESG, article 9Funds that meet the EU’s highest requirements on ESG disclosure could come to represent half of the region’s total assets under management (AUM) in just the next 12 months.

Morningstar figures show that funds complying with the disclosure requirements are currently equal to 34% of total EU AUM but could be equal to 50% in a year’s time as asset managers continue to upgrade existing strategies or launch new ones that meet Article 8 or Article 9 standards.

Under the EU’s Sustainable Finance Disclosures Regulation (SFDR), Article 8 and Article 9 funds are funds with the highest amount of ESG disclosure. Current AUM in these funds is €2.98 trillion.

By number of funds, and based on data for 81% of funds available for sale in the EU, Morningstar found 21% were Article 8 and 2.8% were Article 9 funds – in other words about a quarter of all funds were compliant with the higher ESG disclosure standards.

Hortense Bioy, global director of sustainability research at Morningstar, said: “From just over a third [of assets] today, we predict that Article 8 and 9 funds could reach 50% of overall EU fund assets within the next 12 months. Many managers are already reporting a higher proportion of Article 8 and 9 fund assets, while others have unveiled plans to augment their Article 8 and 9 product offerings in the coming months.”

However, in its ‘SFDR: Four months after its introduction’ report - which contains the figures -  Morningstar said that asset managers had taken different interpretations of the SFDR definitions, “some opting for a softer approach than others”, and this had resulted in an “unexpectedly high number and broad range of products labelled Article 8 and Article 9”.

Morningstar’s report suggested surprise that only one Article 8 fund out of the top 20 by AUM (see table below} made reference to ESG in its title.

“Looking at the list, one may be surprised to see that the quasi-totality of the top 20 funds do not have any ESG or related terms in their names that would indicate that they are actively marketed by their asset managers as ESG or sustainable.

“There is only one: Vontobel mtx Sustainable Emerging Markets Leaders. Many investors would have expected more Article 8 funds to reflect the 'greenness' of their mandate in their name, as is the case for Article 9 funds...”.

Out of the 20 largest Article 9 funds, 18 have terms in their names reflecting their sustainable strategy, the report said.


Top 20 Article 8 funds by size

AB American Income (fixed income)

AB Global High Yield (fixed income)

hausInvest (property)

Fidelity Global Technology (equity)

Pictet-Global Megatrend Selection (equity)

Carmignac Patrimoine (allocation)

Allianz China A Shares (equity)

JPM Emerging Markets Equity (equity)

Schroder ISF Euro Corporate Bond Article (fixed income)

Fidelity Global Dividend (equity)

Robeco High Yield Bonds (fixed Income)

Swedbank Robur Technology (equity)

Algebris Financial Credit Article (fixed income)

Wellington Glbl Quality Growth (equity)

Opcimmo LCL Opcimmo (property)

Pictet - Robotics (equity)

Robeco Global Consumer Trends (equity)

Allianz Europe Equity Growth (equity)

Swedbank Robur Allemansfond Komplett (equity)

Vontobel mtx Sustainable EM Leaders (equity)

*Assets range from €21bn to €8bn. Source: Morningstar. Full table in the report, SFDR: the first 20 days.

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