Investors pulled €30 billion from Article 8 funds in Q2, but poured almost €6 billion into ‘greener’ Article 9 mandates against a backdrop of inflation, conflict and fears of a global recession, according to Morningstar data.
In a second-quarter review of Article 8 and 9 funds, as classified by the EU’s Sustainable Finance Disclosure Regulation (SFDR), Morningstar looked at flows, assets and products in this segment of the market.
Under SFDR, which came into force in March 2021, funds for sale in the EU are classified as either Article 6, 8 or 9 depending on their level of sustainability.
Article 6 funds do not have a sustainability scope, Article 8 funds are ‘light green’, promoting environmental and social factors, while Article 9 funds are ‘dark green’, placing ESG factors at the heart of their objectives.
Morningstar found Article 8 and 9 funds together accounted for just over 50% market share of the EU fund universe in the second quarter, but saw their assets decline by 6.4% at the end of June.
Product development remained stable, with 183 new fund launches during the second quarter, while over700 products re-categorised their SFDR status, with most being upgraded from Article 6 to 8.
Morningstar also looked at the ESG credentials of ‘light green’ versus ‘dark green’ funds, considering their ESG risk and exposure to controversial activities such as fossil fuels and nuclear power.
As expected it found Article 8 and 9 funds are less exposed to weapons and tobacco than Article 6 funds, but Morningstar noted there was still some exposure to fossil fuels and nuclear even in the ‘dark green’ funds, which may “come as a surprise to some investors”.
“Only a minority of Article 8 funds (22%) and Article 9 funds (24%) have no fossil fuel involvement,” it said. This is because funds are investing in so-called transitioning companies, such as oil and gas and utility companies that have pledged to move away from carbon-intensive activities towards net-zero emissions.”
©Markets Media Europe 2022
TOP OF PAGE
