SFDR-Based ESG Fund Data
The European Fund and Asset Management Association (EFAMA) releases ESG fund data based on the Sustainable Finance Disclosure Regulation (SFDR), aiming to summarize the development of ESG funds in Europe.
The ESG fund data comes from the 2023 European Asset Management Report. EFAMA believes that incorporating ESG factors into asset allocation has become an important consideration for European asset management companies. Despite the lack of a consistent definition, 50% of total assets under management in Europe now adopt ESG investing methods.
Related Post: EFAMA Releases a Report on Fund Market under SFDR
ESG Funds and SFDR
In addition to customer demand for sustainable assets, requirements from regulatory authorities are also an essential driving force for the continued development of European ESG funds. The Sustainable Finance Disclosure Regulations (SFDR) stipulate mandatory disclosure obligations for asset management companies and provide a basis for helping investors understand, compare, and monitor sustainable financial products.
Although SFDR did not directly create the ESG fund label, funds have been divided into three categories:
- Funds that comply with SFDR Article 6, whereby companies are required to disclose the integration of sustainability and the possible impact on fund returns.
- Funds that comply with SFDR Article 8, whereby companies are required to disclose how the fund promotes environmental or social characteristics and the governance actions of investee companies.
- Funds that comply with SFDR Article 9, whereby companies are required to disclose how the fund achieves sustainable development goals and whether it adopts a sustainability index as a benchmark.
SFDR-Based ESG Fund: Article 8 and Article 9
In SFDR-Based ESG fund scope, Article 8 funds and Article 9 funds are the funds with the most sustainable characteristics, and their data have been statistically analyzed. The total size of Article 8 funds in Europe is 4 trillion euros, of which France (29%), the Netherlands (17%), Germany (15%), and Sweden (12%) account for the largest proportions. The total size of Article 9 funds in Europe is 254.5 billion euros, of which France (44%), Switzerland (25%), Denmark (6%), and Finland (6%) account for the highest proportions.
Among Article 8 funds, stock funds account for the highest proportion (27%), followed by money market funds (24%), multi-asset funds (22%) and bond funds (22%). Among Article 9 funds, stock funds account for more than half (54%), followed by bond funds (11%) and multi-asset funds (9%). After the SFDR tightened standards, many Article 9 funds were reclassified as Article 8 funds. With the subsequent regulation of SFDR, ESG funds may continue to change in the future.
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