During Q2 and Q3 of 2022, Article 9 funds were the only ones able to have a positive net flow of capital in Europe. They recorded inflows of EUR 12.6 billion in Q3 2022 - twice as much as the inflows in Q2 2022, despite the economic downturn.
In the meantime, Article 6 funds lost investment at an increasing rate each quarter. During the previous year (2021), Article 6 funds were also the ones attracting increasingly less capital.
These findings were reported by Morningstar Manager Research and can be seen in the graph below:
An article by the Financial Times also highlights the positive trend among sustainability-driven funds. According to the FT, “ESG products” received 65% of the capital flows into European exchange-traded funds (ETFs), versus 51% in 2021.
Maybe it is not a coincidence that, in Q3 2022, fund managers decided to change the status of approximately 340 products from Article 6 to Article 8.
On the other hand, also in Q3 2022, fund managers proactively downgraded 42 products from Article 9 to Article 8. According to Morningstar team, it could be a consequence of the increasing disclosure pressures imposed by SFDR. "Many fund and asset managers might have applied precaution when re-labeling their funds, as some definitions and criteria are still not entirely clear", assesses Connect Earth's Head of Sustainability, Nora Sandahl.
Connect Earth team's takeaway from these readings is that the market seems enthusiastic about sustainable investment and, for the past two years, there has been a visible increase in capital flows to Article 8 and 9 funds. But success comes with much effort. Keeping the status of Article 8 and 9 funds could be more challenging than initially anticipated by fund and asset managers who might have been too quick to classify their funds as sustainable.
Read Connect Earth's team explanation about SFDR's Article 6, 8, and 9.