Article 9 funds see lowest inflows on record
Dark green funds saw their lowest flows on record through the second quarter of 2023, despite sustainable fund assets passing the €5trn mark for the first time.
Assets in Article 8 and Article 9 funds rose by 1.4% over the quarter, despite the former losing €14.6bn in outflows, while the latter saw their lowest inflows (€3.6bn) since the introduction of SDFR in 2021.
Data from Morningstar’s SFDR Article 8 and Article 9 Funds: Q2 2023 in Review revealed that, despite the poor inflows, Article 9 funds saw the best performance of any SFDR classification, rising 1.2% organically throughout the quarter. The report noted a ‘stronger presence of passive strategies’ in sustainable funds over the quarter, with the Article 8 Goldman Sachs Enhanced Index Sustainable Global Equity fund alone gaining €3.2bn.
Morningstar also said the outflows from Article 8 funds ‘disproportionally affected Article 8 funds with no commitment to sustainable investments’, with a third of the outflows coming from such funds.
The report also found that fund reclassifications, which surged following new guidelines over SFDR, had slowed, with only six funds downgrading from Article 9 to Article 8 during the quarter, while 180 funds upgraded from Article 6 to Article 8.
In total, almost half of all funds launched in the EU during Q2 were Article 8 or 9, with 161 funds launched over the three months. Morningstar said the number of launches showed ‘little change’ from the previous quarter, but warned of a potential period of ‘continued slowdown in product development activity’.
Another emerging trend has been the development of sustainable investment definitions and measurements in portfolios, with 190 Article 8 funds updating their minimum sustainable investment allocations during the quarter.
Meanwhile, almost 600 Article 8 and Article 9 funds now report a carbon reduction objective.